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Welfare Migration: Is the Net Fiscal Burden a Good Measure of its Economics Impact on the Welfare of the Native-Born Population?

  • Assaf Razin
  • Efraim Sadka

Migration of young workers (as distinct from retirees), even when driven in by the generosity of the welfare state, slows down the trend of increasing dependency ratio. But, even though low-skill migration improves the dependency ratio, it nevertheless burdens the welfare state. Recent studies by Smith and Edmonston (1977), and Sinn et al (2003) comprehensively estimate the fiscal burden that low-skill migration imposes on the fiscal system. However, an important message of this paper is that in an infinite-horizon set-up, one cannot fully grasp the implications of migration for the welfare state just by looking at the net fiscal burden that migrants impose on the fiscal system. In an infinite-horizon, overlapping generations economy, this net burden could change to net gain to the native-born population.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2004/wp-cesifo-2004-09/cesifo1_wp1273.pdf
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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1273.

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Date of creation: 2004
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Handle: RePEc:ces:ceswps:_1273
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  1. Razin, A. & Sadka, E., 1999. "Unskilled Migration: a Burden or a Boon for the Welfare State?," Papers 8-99, Tel Aviv.
  2. Sinn, Hans-Werner, 2004. "EU Enlargement, Migration and the New Constitution," Munich Reprints in Economics 19609, University of Munich, Department of Economics.
  3. Razin, Assaf & Sadka, Efraim, 1993. "The Economy of Modern Israel," University of Chicago Press Economics Books, University of Chicago Press, edition 1, number 9780226705897, Spring.
  4. Philip Oreopoulos & Alan J. Auerbach, 1999. "Analyzing the Fiscal Impact of U.S. Immigration," American Economic Review, American Economic Association, vol. 89(2), pages 176-180, May.
  5. Storesletten, Kjetil, 1998. "Sustaining Fiscal Policy Through Immigration," Seminar Papers 664, Stockholm University, Institute for International Economic Studies.
  6. Razin, A. & Sadka, E., 1992. "Resisting Migration: Wage Rigidity and Income Redistribution," Papers 28-94, Tel Aviv.
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