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Migration and the Welfare State: A Dynamic Political-Economy Theory

  • Assaf Razin
  • Efraim Sadka
  • Benjarong Suwankiri

We develop a dynamic politico-economic theory of welfare state and immigration policies, featuring three groups of voters: skilled workers, unskilled workers, and old retirees. The welfare-state is modeled by a proportional tax on labor income to finance a demogrant in a balanced-budget manner to capture the essence of inter- and intra- generational redistribution of a typical welfare system. Migrants arrive when young and their birth rate exceeds the native-born birth rate. We characterize political-economic equilibrium policy rules consisting of the tax rate, the skill composition of migrants, and the total number of migrants, in terms of demographic and labor productivity characteristics. We find that political coalitions will form among skilled and unskilled voters or among unskilled and old voters in order to block the other group from coming into power. As a consequence, the ideal policies of the unskilled voters are featured more often in the political economy equilibria than any other groups regardless of the size of unskilled voters.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 15597.

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Date of creation: Dec 2009
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Publication status: published as Assaf Razin, Efraim Sadka, and Benjarong Suwankiri, MIGRATION AND THE WELFARE ST ATE: POLITICAL-ECONOMY , FORMATION POLICY MIT Press, October 2011.
Handle: RePEc:nbr:nberwo:15597
Note: IFM
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  1. Kjetil Storesletten, . "Sustaining Fiscal Policy Through Immigration," Homapage Papers _005, Stockholm University, Institute for International Economic Studies.
  2. Jim Dolmas & Gregory W. Huffman, 1998. "On the political economy of immigration and income redistribution," Working Papers 9804, Federal Reserve Bank of Dallas.
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  14. Jasso, Guillermina & Rosenzweig, Mark R., 2008. "Selection Criteria and the Skill Composition of Immigrants: A Comparative Analysis of Australian and U.S. Employment Immigration," IZA Discussion Papers 3564, Institute for the Study of Labor (IZA).
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  19. repec:ebl:ecbull:v:6:y:2006:i:2:p:1-11 is not listed on IDEAS
  20. Casarico, Alessandra & Devillanova, Carlo, 2003. "Social security and migration with endogenous skill upgrading," Journal of Public Economics, Elsevier, vol. 87(3-4), pages 773-797, March.
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  34. Boeri, Tito & Hanson, Gordon H. & McCormick, Barry (ed.), 2002. "Immigration Policy and the Welfare System: A Report for the Fondazione Rodolfo Debenedetti," OUP Catalogue, Oxford University Press, number 9780199256310, March.
  35. Edith Sand & Assaf Razin, 2007. "The Political-Economy Positive Role of the Social Security System in Sustaining Immigration (But Not Vice Versa)," NBER Working Papers 13598, National Bureau of Economic Research, Inc.
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