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Estimating the impact of immigrants on the host country social security system when return migration is an endogenous choice

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  • Kirdar, Murat G.

Abstract

In this paper, I examine the impact of immigrants on the social security system in Germany when return migration is an endogenous choice. For this purpose, I develop a dynamic stochastic model of joint return migration and saving decisions that accounts for uncertainty in future employment and income and estimate this model using a longitudinal dataset on immigrants from five different source countries. I find that immigrants make positive net contributions to both the pension and unemployment insurance systems in Germany regardless of their country of origin and age-at-entry. Moreover, the magnitudes of the net contributions are remarkable for certain groups. Return migration plays a critical role in generating these positive net contributions. In a counterfactual, I examine how much exogenous modeling of the return decision, which has been the practice of the literature so far, changes immigrants’ net contributions. Such a restriction causes a serious misestimation of net contributions. I also examine the impact of a counterfactual policy experiment in which financial bonuses are provided conditional on return to certain unemployed immigrants. Such a policy turns out to be ineffective in a number of dimensions.

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  • Kirdar, Murat G., 2008. "Estimating the impact of immigrants on the host country social security system when return migration is an endogenous choice," MPRA Paper 7803, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:7803
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    Cited by:

    1. Slobodan Djajić, 2014. "Temporary Emigration And Welfare: The Case Of Low‐Skilled Labor," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 55(2), pages 551-574, May.
    2. Bernt Bratsberg & Oddbjørn Raaum & Knut Røed, 2018. "Job Loss and Immigrant Labour Market Performance," Economica, London School of Economics and Political Science, vol. 85(337), pages 124-151, January.
    3. Aubry, Amandine & Burzyński, Michał & Docquier, Frédéric, 2016. "The welfare impact of global migration in OECD countries," Journal of International Economics, Elsevier, vol. 101(C), pages 1-21.
    4. Christian Dustmann & Joseph-Simon Görlach, 2016. "The Economics of Temporary Migrations," Journal of Economic Literature, American Economic Association, vol. 54(1), pages 98-136, March.
    5. Robert Holzmann & Johannes Koettl, 2015. "Portability of Pension, Health, and Other Social Benefits: Facts, Concepts, and Issues," CESifo Economic Studies, CESifo, vol. 61(2), pages 377-415.
    6. Busch, Christopher & Krueger, Dirk & Ludwig, Alexander & Popova, Irina & Iftikhar, Zainab, 2020. "Should Germany have built a new wall? Macroeconomic lessons from the 2015-18 refugee wave," Journal of Monetary Economics, Elsevier, vol. 113(C), pages 28-55.
    7. Fausto Galli & Simone Manzavino & Giuseppe Russo, 2023. "Immigration Restriction and The Transfer of Cultural Norms Over Time and Boundaries:The Case of Religiosity," CSEF Working Papers 683, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    8. Christian Dustmann & Giovanni Facchini & Cora Signorotto, 2015. "Population, Migration, Ageing and Health: A Survey," RF Berlin - CReAM Discussion Paper Series 1518, Rockwool Foundation Berlin (RF Berlin) - Centre for Research and Analysis of Migration (CReAM).
    9. Faruk, Balli & Syed Abul, Basher & Rosmy, Jean Louis & Ahmed Saber, Mahmud, 2016. "On the global determinants of visiting home," MPRA Paper 72291, University Library of Munich, Germany.
    10. Jérôme Adda & Christian Dustmann & Joseph-Simon Görlach, 2022. "The Dynamics of Return Migration, Human Capital Accumulation, and Wage Assimilation [Immigration and Spatial Equilibrium: The Role of Expenditures in the Country of Origin]," Review of Economic Studies, Oxford University Press, vol. 89(6), pages 2841-2871.
    11. Fausto Galli & Giuseppe Russo, 2019. "Immigration restrictions and second-generation cultural assimilation: theory and quasi-experimental evidence," Journal of Population Economics, Springer;European Society for Population Economics, vol. 32(1), pages 23-51, January.
    12. Bijwaard, G.E., 2009. "Labour Market Status and Migration Dynamics," Econometric Institute Research Papers EI 2009-25, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
    13. Hannah Zillessen, 2022. "Uncertainty, Citizenship & Migrant Saving Choices," Economics Series Working Papers 1008, University of Oxford, Department of Economics.
    14. Murat Kırdar, 2013. "Source country characteristics and immigrants’ optimal migration duration decision," IZA Journal of Migration and Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 2(1), pages 1-21, December.
    15. Akay, Alpaslan & Brausmann, Alexandra & Djajić, Slobodan & Kırdar, Murat G., 2021. "Purchasing-power-parity and the saving behavior of temporary migrants," European Economic Review, Elsevier, vol. 134(C).
    16. Djajic, Slobodan & Kirdar, Murat G. & Vinogradova, Alexandra, 2016. "Source-country earnings and emigration," Journal of International Economics, Elsevier, vol. 99(C), pages 46-67.
    17. Dogu Tan Araci & Murat Demirci & Murat Guray Kirdar, 2021. "Development Level of Hosting Areas and the Impact of Refugees on Natives’ Labor Market Outcomes," Koç University-TUSIAD Economic Research Forum Working Papers 2102, Koc University-TUSIAD Economic Research Forum.
    18. Djajić, Slobodan, 2014. "Asylum seeking and irregular migration," International Review of Law and Economics, Elsevier, vol. 39(C), pages 83-95.
    19. Aracı, Doğu Tan & Demirci, Murat & Kırdar, Murat Güray, 2022. "Development level of hosting areas and the impact of refugees on natives’ labor market outcomes in Turkey☆," European Economic Review, Elsevier, vol. 145(C).
    20. Slobodan Djajić, 2017. "Transit migration," Review of International Economics, Wiley Blackwell, vol. 25(5), pages 1017-1045, November.
    21. Mohammed Anam Akhtar & Imran Khan & and Khurram Ajaz Khan, 2023. "Linking Financial Capability, Advice, Anxiety, Social Security, and Residential Status with Outward Remittances: Evidence from the UAE," Contemporary Review of the Middle East, , vol. 10(4), pages 386-407, December.
    22. Holzmann, Robert & Koettl, Johannes, 2011. "Portability of pension, health, and other social benefits : facts, concepts, issues," Social Protection Discussion Papers and Notes 62725, The World Bank.
    23. Bossavie,Laurent Loic Yves & Gorlach,Joseph-Simon & Ozden,Caglar & Wang,He, 2021. "Temporary Migration for Long-term Investment," Policy Research Working Paper Series 9740, The World Bank.
    24. Al Husein, N. & Wagner, N., 2020. "Determinants of intended return migration among refugees : A comparison of Syrian refugees in Germany and Turkey," ISS Working Papers - General Series 127798, International Institute of Social Studies of Erasmus University Rotterdam (ISS), The Hague.
    25. Joseph-Simon Görlach & Katarina Kuske, 2022. "Temporary migration entails benefits, but also costs, for sending and receiving countries," IZA World of Labor, Institute of Labor Economics (IZA), pages 503-503, November.

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    More about this item

    Keywords

    Immigrant Workers; Life Cycle Models and Saving; Social Security and Public Pensions; Unemployment Insurance; Public Policy;
    All these keywords.

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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