Sustaining Fiscal Policy Through Immigration
This paper explores the fiscal implications of immigration to the US and argues that immigration policy should be viewed as a vital part of fiscal policy. In particular a case is made that skills and age at the time of arrival are of great importance for the cost-benefit calculation of new immigrants. Using a calibrated general equilibrium overlapping generations model, which explicitly accounts for key differences between immigrants and natives, Social Security and the demographic transition, I investigate if an immigration policy reform alone could resolve the fiscal problems associated with the ageing of the baby boom generation I find that such policies exist and are characterized by increased inflows of working-age high and medium skilled immigrants. One particular feasible policy involves admitting 1.6 million 40-44 year-old high skilled immigrants annually compared to a total of 1.1 million today. In contrast an income tax hike of 4.4% points would be required if future fiscal problems were to be solved by a once and for all tax reform. To further illuminate the fiscal impact of immigration I compute the net government gain in present value terms of admitting one additional immigrant. This figure varies considerably with age and skills and reaches a maximum of seven times GNP per capita for high skilled 40-44 year-old immigrants. In contrast new immigrants represent on average a small net gain of $7,400 or 0.3 times GNP per capita.
(This abstract was borrowed from another version of this item.)
|Date of creation:|
|Date of revision:|
|Contact details of provider:|| Postal: S-106 91 Stockholm|
Web page: http://www.iies.su.se/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- José-Víctor Ríos-Rull, 1996. "Life-Cycle Economies and Aggregate Fluctuations," Review of Economic Studies, Oxford University Press, vol. 63(3), pages 465-489.
- George J. Borjas, 1994. "The Economics of Immigration," Journal of Economic Literature, American Economic Association, vol. 32(4), pages 1667-1717, December.
- Ather H. Akbari, 1989. "The Benefits of Immigrants to Canada: Evidence on Tax and Public Services," Canadian Public Policy, University of Toronto Press, vol. 15(4), pages 424-435, December.
- Holger Bonin & Bernd Raffelhüschen & Jan Walliser, 2000.
"Can Immigration Alleviate the Demographic Burden?,"
FinanzArchiv: Public Finance Analysis,
Mohr Siebeck, Tübingen, vol. 57(1), pages 1-, September.
- Hurd, Michael D, 1989. "Mortality Risk and Bequests," Econometrica, Econometric Society, vol. 57(4), pages 779-813, July.
- Alan J. Auerbach & Laurence J. Kotlikoff & Robert P. Hagemann & Giuseppe Nicoletti, 1989. "The Economic Dynamics of an Ageing Population: The Case of Four OECD Countries," OECD Economics Department Working Papers 62, OECD Publishing.
- George J. Borjas & Lynette Hilton, 1996. "Immigration and the Welfare State: Immigrant Participation in Means-Tested Entitlement Programs," The Quarterly Journal of Economics, Oxford University Press, vol. 111(2), pages 575-604.
- Borjas, George J & Bratsberg, Bernt, 1996.
"Who Leaves? The Outmigration of the Foreign-Born,"
The Review of Economics and Statistics,
MIT Press, vol. 78(1), pages 165-76, February.
- Michael Baker & Dwayne Benjamin, 1995. "The Receipt of Transfer Payments by Immigrants to Canada," Journal of Human Resources, University of Wisconsin Press, vol. 30(4), pages 650-676.
When requesting a correction, please mention this item's handle: RePEc:wop:stocis:_005. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Thomas Krichel)
If references are entirely missing, you can add them using this form.