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The migration challenge for PAYG

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  • Gurgen Aslanyan

Abstract

Immigration has been popularised in the economics literature as a tool that could be used to balance troubled PAYG pension systems. Pivotal research by Razin and Sadka shows that unskilled immigration can overcome the pension problem and, further, boost the general welfare in the host economy. However, a large strand of current economics research is engaged in identifying mechanisms through which unskilled immigration, while solving the pension problem, is causing undesired shifts in general welfare. This work shows that recurring unskilled immigration will not only reduce the general welfare but may also be challenging the pension system by reducing the pension benefits themselves. Further interpreting the actual data, it is suggested that immigration policies are designed either based on public finances only or in a political environment of gerontocracy. Copyright Springer-Verlag Berlin Heidelberg 2014

Suggested Citation

  • Gurgen Aslanyan, 2014. "The migration challenge for PAYG," Journal of Population Economics, Springer;European Society for Population Economics, vol. 27(4), pages 1023-1038, October.
    • Handle: RePEc:spr:jopoec:v:27:y:2014:i:4:p:1023-1038
    DOI: 10.1007/s00148-014-0516-x
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    References listed on IDEAS

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    Cited by:

    1. Kojun Hamada & Akihiko Kaneko & Mitsuyoshi Yanagihara, 2022. "Fertility decline and a pay‐as‐you‐go pension system in a two‐sector model," Metroeconomica, Wiley Blackwell, vol. 73(2), pages 466-480, May.
    2. Razin, Assaf & Sadka, Efraim, 2014. "Migration and Welfare State: Why is America Different from Europe?," CEPR Discussion Papers 10127, C.E.P.R. Discussion Papers.
    3. Zaiceva, A. & Zimmermann, K.F., 2016. "Migration and the Demographic Shift," Handbook of the Economics of Population Aging, in: Piggott, John & Woodland, Alan (ed.), Handbook of the Economics of Population Aging, edition 1, volume 1, chapter 0, pages 119-177, Elsevier.
    4. Zuzana Brokesova & Andrej Cupak & Gueorgui Kolev, 2017. "Financial literacy and voluntary savings for retirement in Slovakia," Working and Discussion Papers WP 10/2017, Research Department, National Bank of Slovakia.

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    More about this item

    Keywords

    Public pensions; PAYG; Unskilled migration; Capital dilution; J18; F22; H55;
    All these keywords.

    JEL classification:

    • J18 - Labor and Demographic Economics - - Demographic Economics - - - Public Policy
    • 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
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination

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