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Migration and the Welfare State: Dynamic Political-Economy Theory

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  • Assaf Razin
  • Efraim Sadka
  • Benjarong Suwankiri

Abstract

We model an overlapping-generations economy with two skill levels: skilled and unskilled. The welfare-state is modeled simply by a proportional tax on labor income to finance a demogrant in a balanced-budget manner. Therefore, some (the unskilled workers and old retirees) are net beneficiaries from the welfare state and others (the skilled workers) are net contributors to it. Migration policies are set to determine the total migration volume and its skill composition.We characterize subgame-perfect Markov political-economic equilibria consisting of the tax rate (which determines the demogrant), skill composition and the total number of migrants. We distinguish between two voting behaviors: sincere and strategic voting.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2991.

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Date of creation: 2010
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Handle: RePEc:ces:ceswps:_2991
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  • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
  • F20 - International Economics - - International Factor Movements and International Business - - - General
  • H00 - Public Economics - - General - - - General

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Cited by:

  1. Assaf Razin, 2013. "Migration into the Welfare State: Tax and Migration Competition," NBER Working Papers 19346, National Bureau of Economic Research, Inc.
  2. Ian Preston, 2013. "The Effect of Immigration on Public Finances," CReAM Discussion Paper Series 1323, Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London.

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