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"Welfare magnetism" in the EU-15? Why the EU enlargement did not start a race to the bottom of welfare states

  • Skupnik, Christoph
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    According to the welfare magnet hypothesis, migrants with a high likelihood of claiming benefits cluster in the most generous welfare systems. After the introduction of the freedom of movement for Eastern European workers, EU-15 countries can thus be expected to reduce public benefits in order to avoid becoming welfare magnets. However, OECD data on benefits do not support the prediction of a race to the bottom in protection levels. Using data from the EU-LFS 2004 to 2011, I analyze the determinants of migration flows and find that, in contrast to theory, welfare state variables do not significantly affect migration flows when controlling for temporary political restrictions of the freedom of movement (2+3+2 rule). This explains why the pressure to modify national welfare spending is small. Furthermore, evidence is found that the restrictions completely offset the incentive effects of work-related pull factors and thereby hamper an efficient allocation of labor across national borders.

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    File URL: http://econstor.eu/bitstream/10419/76883/1/751711640.pdf
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    Paper provided by Free University Berlin, School of Business & Economics in its series Discussion Papers with number 2013/8.

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    Date of creation: 2013
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    Handle: RePEc:zbw:fubsbe:20138
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    1. Borjas, George J, 1999. "Immigration and Welfare Magnets," Journal of Labor Economics, University of Chicago Press, vol. 17(4), pages 607-37, October.
    2. A. Colin Cameron & Jonah B. Gelbach & Douglas L. Miller, 2006. "Robust Inference with Multi-way Clustering," NBER Technical Working Papers 0327, National Bureau of Economic Research, Inc.
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    12. repec:nsr:niesrd:379 is not listed on IDEAS
    13. Zaiceva, Anzelika & Zimmermann, Klaus F, 2008. "Scale, Diversity and Determinants of Labour Migration in Europe," CEPR Discussion Papers 6921, C.E.P.R. Discussion Papers.
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