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Migration and Social Insurance

  • Cremer, Helmuth
  • Goulão, Catarina

A wide variety of social protection systems coexist within the EU. Some member states provide social insurance that is of Beveridgean inspiration (with universal and more or less flat benefits), while others offer a system that is mainly Bismarckian (with benefits related to past contributions). Labor mobility raises concerns about the sustainability of the most generous and redistributive (Beveridgean) insurance systems. We address this issue in a two-country setting, where individuals differ in mobility cost (attachment to their native country). A Bismarckian insurance system is not affected by migration while a Beveridgean one is. Our results suggest that the race-to-the-bottom affecting tax rates may be more important under Beveridge-Beveridge competition than under Beveridge-Bismarck competition. Finally, we study the strategic choice of the type of social protection. We show that Bismarckian governments may find it beneficial to adopt a Beveridgean insurance system.

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Paper provided by Institut d'Économie Industrielle (IDEI), Toulouse in its series IDEI Working Papers with number 657.

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Date of creation: Jan 2011
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Publication status: Published in Louvain Economic Review - Recherches Economiques de Louvain, vol.�80, 2014, p.�5-29.
Handle: RePEc:ide:wpaper:24004
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  1. LEITE MONTEIRO , Manuel, 1994. "Redistributive Policy with Labour Mobility across Countries," CORE Discussion Papers 1994070, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  2. CREMER, Helmuth & PESTIEAU, Pierre, . "Social insurance, majority voting and labor mobility," CORE Discussion Papers RP -1328, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. Lejour, Arjan M & Verbon, Harrie A A, 1994. " Labour Mobility and Decision Making on Social Insurance in an Integrated Market," Public Choice, Springer, vol. 79(1-2), pages 161-85, April.
  4. Poutvaara, Panu, 2005. "Social Security Incentives, Human Capital Investment and Mobility of Labor," IZA Discussion Papers 1729, Institute for the Study of Labor (IZA).
  5. Sinn, Hans-Werner, 1990. "Tax harmonization and tax competition in Europe," European Economic Review, Elsevier, vol. 34(2-3), pages 489-504, May.
  6. Hindriks, Jean, 1999. "The consequences of labour mobility for redistribution: tax vs. transfer competition," Journal of Public Economics, Elsevier, vol. 74(2), pages 215-234, November.
  7. Stéphane Rossignol & Emmanuelle Taugourdeau, 2006. "Asymmetric social protection systems with migration," Journal of Population Economics, Springer, vol. 19(3), pages 481-505, July.
  8. CREMER, Helmuth & PESTIEAU, Pierre, . "Social insurance competition between Bismarck and Beveridge," CORE Discussion Papers RP -1697, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  9. Dominique BUREAU & Cécile RICHARD, 1997. "Public Insurance and Mobility: An Exploratory Analysis in the Context of European Economic Unification," Annales d'Economie et de Statistique, ENSAE, issue 45, pages 275-290.
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