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Immigration in a Segmented Labor Market: The Effects on Welfare

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  • Javier Vázquez Grenno

Abstract

Using an OLG model with pension system and unemployment insurance, this paper analyses the effect of low-skilled immigration (regular and irregular) shocks on the wellbeing of the native people. We show that low-skilled immigration benefits the pensioners of the initial period and skilled native workers, and damages the low-skilled ones. Furthermore, we show that the unskilled immigration decreases the pension and unemployment benefits, and increases the unemployment rate. Additionally, the composition of immigration does not affect the unemployment rate in the long run. However, during the transition, the effects of immigration are increasing in the proportion of irregular immigrants.

Suggested Citation

  • Javier Vázquez Grenno, 2008. "Immigration in a Segmented Labor Market: The Effects on Welfare," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 64(2), pages 199-217, June.
  • Handle: RePEc:mhr:finarc:urn:sici:0015-2218(200806)64:2_199:iiaslm_2.0.tx_2-k
    DOI: 10.1628/001522108X335082
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    References listed on IDEAS

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    1. Razin, Assaf & Sadka, Efraim, 2000. " Unskilled Migration: A Burden or a Boon for the Welfare State?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 102(3), pages 463-479, June.
    2. David Card, 2005. "Is the New Immigration Really so Bad?," Economic Journal, Royal Economic Society, vol. 115(507), pages 300-323, November.
    3. M. Dolores Collado & IÒigo Iturbe-Ormaetxe & Guadalupe Valera, 2004. "Quantifying the Impact of Immigration on the Spanish Welfare State," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 11(3), pages 335-353, May.
    4. Krieger, Tim, 2003. "Voting on Low-Skill Immigration under Different Pension Regimes," Public Choice, Springer, vol. 117(1-2), pages 51-78, October.
    5. Tim Krieger, 2004. "Fertility rates and skill distribution in Razin and Sadka’s migration-pension model: A note," Journal of Population Economics, Springer;European Society for Population Economics, vol. 17(1), pages 177-182, February.
    6. George J. Borjas, 2003. "The Labor Demand Curve is Downward Sloping: Reexamining the Impact of Immigration on the Labor Market," NBER Working Papers 9755, National Bureau of Economic Research, Inc.
    7. Haupt, Alexander & Peters, Wolfgang, 1998. "Public Pensions and Voting on Immigration," Public Choice, Springer, vol. 95(3-4), pages 403-413, June.
    8. Gang, Ira N & Rivera-Batiz, Francisco L, 1994. "Labor Market Effects of Immigration in the United States and Europe: Substitution vs. Complementarity," Journal of Population Economics, Springer;European Society for Population Economics, vol. 7(2), pages 157-175.
    9. George J. Borjas & Richard B. Friedman & Lawrence F. Katz, 1997. "How Much Do Immigration and Trade Affect Labor Market Outcomes?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(1), pages 1-90.
    10. Razin, Assaf & Sadka, Efraim, 1999. "Migration and pension with international capital mobility," Journal of Public Economics, Elsevier, vol. 74(1), pages 141-150, October.
    11. Holger Bonin & Bernd Raffelhüschen & Jan Walliser, 2000. "Can Immigration Alleviate the Demographic Burden?," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 57(1), pages 1-1, September.
    12. George J. Borjas, 2003. "The Labor Demand Curve is Downward Sloping: Reexamining the Impact of Immigration on the Labor Market," The Quarterly Journal of Economics, Oxford University Press, vol. 118(4), pages 1335-1374.
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    More about this item

    Keywords

    migration; dynamic system; public pensions; unemployment;

    JEL classification:

    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers

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