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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. 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.
    2. 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.
    3. 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.
    4. 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.
    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. Slobodan Djajić, 2017. "Transit migration," Review of International Economics, Wiley Blackwell, vol. 25(5), pages 1017-1045, November.
    7. 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.
    8. Bijwaard, Govert, 2009. "Labour Market Status and Migration Dynamics," IZA Discussion Papers 4530, Institute of Labor Economics (IZA).
    9. Christian Dustmann & Giovanni Facchini & Cora Signorotto, 2015. "Population, Migration, Ageing and Health: A Survey," CReAM Discussion Paper Series 1518, Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London.
    10. 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.
    11. Jérôme Adda & Christian Dustmann & Joseph-Simon Görlach, "undated". "The Dynamics of Return Migration, Human Capital Accumulation, and Wage Assimilation," CReAM Discussion Paper Series 2111, Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London.
    12. 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.
    13. 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.
    14. 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).
    15. 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.
    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. 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.
    19. Djajić, Slobodan, 2014. "Asylum seeking and irregular migration," International Review of Law and Economics, Elsevier, vol. 39(C), pages 83-95.

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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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