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The political economy of immigration and population ageing

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  • Dotti, Valerio

Abstract

I investigate the effects of population ageing on immigration policies. Voters' attitude towards immigrants depends on how the net gains from immigration are divided up in the society by the fiscal policy. In the theoretical literature this aspect is treated as exogenous to the political process because of technical constraints. This generates inconsistent predictions about the policy outcome. I adopt a new equilibrium concept for voting models to analyse the endogenous relationship between immigration and fiscal policies and solve this apparent inconsistency. I show that the elderly and the poor have a common interest in limiting immigration and in increasing public spending. This exacerbates the effects of population ageing on public finances and results in a high tax burden on working age individuals and further worsens the age profile of the population. Moreover, I show that if the share of elderly population is suffciently large, then a society is unambiguously harmed by the tightening in the immigration policy caused by the demographic change. The implications of the model are consistent with the patterns observed in UK attitudinal data and in line with the findings of the empirical literature about migration.

Suggested Citation

  • Dotti, Valerio, 2016. "The political economy of immigration and population ageing," Working Papers 16-12, University of Mannheim, Department of Economics.
  • Handle: RePEc:mnh:wpaper:41185
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    References listed on IDEAS

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    1. Timothy Besley & Stephen Coate, 1997. "An Economic Model of Representative Democracy," The Quarterly Journal of Economics, Oxford University Press, vol. 112(1), pages 85-114.
    2. Krieger, Tim, 2003. "Voting on Low-Skill Immigration under Different Pension Regimes," Public Choice, Springer, vol. 117(1-2), pages 51-78, October.
    3. Dotti, Valerio, 2014. "The Political Economy of Publicly Provided Private Goods," MPRA Paper 54026, University Library of Munich, Germany.
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    7. Levy, Gilat, 2004. "A model of political parties," Journal of Economic Theory, Elsevier, vol. 115(2), pages 250-277, April.
    8. Meltzer, Allan H & Richard, Scott F, 1981. "A Rational Theory of the Size of Government," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 914-927, October.
    9. Razin, Assaf & Sadka, Efraim & Suwankiri, Benjarong, 2011. "Migration and the Welfare State: Political-Economy Policy Formation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262016109.
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    Cited by:

    1. Levy, Gilat & Razin, Ronny, 2018. "Immigration into Prejudiced Societies: Segregation and Echo Chambers effects," CEPR Discussion Papers 12630, C.E.P.R. Discussion Papers.
    2. Dotti, Valerio, 2019. "Political Parties and Policy Outcomes. Do Parties Block Reforms?," MPRA Paper 100227, University Library of Munich, Germany.

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    More about this item

    Keywords

    Immigration ; Ageing ; Policy ; Voting;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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