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Modeling an Immigration Shock

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  • Boldrin, Michele
  • Montes, Ana

Abstract

In this paper, we model an overlapping generation economy affected by an unexpected immigration shock and determine how households would insure themselves against "immigration risks" efficiently. We use the model to study the impact of immigration on (i) the welfare of various generations, (ii) the distributions of income among factors of production, and (iii) the optimal design of the intergenerational welfare state. In particular, we construct a system of public education and public pensions that mimics efficient complete market allocation. We also show the impact of immigration shocks in a small open economy. In this case, our model suggests that the external capital flows can act as substitutes for the missing private insurance markets. Our analysis delivers a set of predictions that we find useful for understanding certain aspects of the Spanish experience during 1996 and 2007.

Suggested Citation

  • Boldrin, Michele & Montes, Ana, 2013. "Modeling an Immigration Shock," MPRA Paper 56765, University Library of Munich, Germany, revised 20 Jun 2014.
  • Handle: RePEc:pra:mprapa:56765
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    References listed on IDEAS

    as
    1. Timothy J. Hatton & Massimiliano Tani, 2005. "Immigration and Inter-Regional Mobility in the UK, 1982-2000," Economic Journal, Royal Economic Society, vol. 115(507), pages 342-358, November.
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    6. Michele Boldrin & Ana Montes, 2005. "The Intergenerational State Education and Pensions," Review of Economic Studies, Oxford University Press, vol. 72(3), pages 651-664.
    7. Gandal, Neil & Hanson, Gordon H. & Slaughter, M.J.Matthew J., 2004. "Technology, trade, and adjustment to immigration in Israel," European Economic Review, Elsevier, vol. 48(2), pages 403-428, April.
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    10. Cohen Goldner, Sarit & Eckstein, Zvi & Weiss, Yoram, 2012. "Immigration and Labor Market Mobility in Israel, 1990 to 2009," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262017679, January.
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    More about this item

    Keywords

    social security; human capital; overlapping generations; immigration; trade deficit; risk sharing;

    JEL classification:

    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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