Working Paper: CEPR ID: DP7185
Authors: Alon Cohen; Assaf Razin; Efraim Sadka
Abstract: Skilled migrants typically contribute to the welfare state more than they draw in benefits from it. The opposite holds for unskilled migrants. This suggests that a host country is likely to boost (respectively, curtail) its welfare system when absorbing high-skill (respectively, low-skill) migration. In this paper we first examine this hypothesis in a politico-economic setup. We then confront the prediction of the theory with evidence. In doing so, we reckon with an endogeneity problem that arise because the skill composition of migration is itself affected by the generosity of the welfare state.
Keywords: skilled vs low skilled migrants; welfare; migration
JEL Codes: F22; H10
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| proportion of skilled migrants (F22) | tax rate and welfare spending (H53) |
| skill composition of migrants (J61) | welfare state generosity (I38) |
| welfare state generosity (I38) | skill composition of migrants (J61) |
| high-skill migrants (J61) | welfare state generosity (I38) |
| low-skill migrants (J61) | welfare state generosity (I38) |