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The Welfare State and Migration: A Dynamic Analysis of Political Coalitions

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  • Razin, Assaf
  • Sadka, Efraim
  • Suwankiri, Benjarong

Abstract

We develop a dynamic political-economic theory of welfare state and immigration policies, featuring three distinct voting groups: skilled workers, unskilled workers, and old retirees. The essence of inter - and intra-generational redistribution of a typical welfare system is captured with a proportional tax on labor income to finance a transfer in a balanced-budget manner. We provide an analytical characterization of political-economic equilibrium policy rules consisting of the tax rate, the skill composition of migrants, and the total number of migrants. When none of these groups enjoy a majority (50 percent of the voters or more), political coalitions will form. With overlapping generations and policy-determined influx of immigrants, the formation of the political coalitions changes over time. These future changes are taken into account when policies are shaped. Naturally, a lower rate of population growth (that is, an aging population) increases the political clout of the old (the left group). But it also increases the burden on the young (particularly, the skilled).

Suggested Citation

  • Razin, Assaf & Sadka, Efraim & Suwankiri, Benjarong, 2015. "The Welfare State and Migration: A Dynamic Analysis of Political Coalitions," CEPR Discussion Papers 10429, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:10429
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    References listed on IDEAS

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    Cited by:

    1. Etro, Federico, 2015. "Research in economics and political economy," Research in Economics, Elsevier, vol. 69(3), pages 261-264.
    2. repec:spr:sochwe:v:49:y:2017:i:3:d:10.1007_s00355-016-0989-5 is not listed on IDEAS

    More about this item

    Keywords

    center; dynamics of left and right coalitions; intra- and inter-generational transfers;

    JEL classification:

    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
    • F15 - International Economics - - Trade - - - Economic Integration
    • H10 - Public Economics - - Structure and Scope of Government - - - General

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