Working Paper: NBER ID: w10682
Authors: Assaf Razin; Efraim Sadka
Abstract: Migration of young workers (as distinct from retirees), even when driven in by the generosity of the welfare state, slows down the trend of increasing dependency ratio. But, even though low-skill migration improves the dependency ratio, it nevertheless burdens the welfare state. Recent studies by Smith and Edmonston (1977), and Sinn et al (2003) comprehensively estimate the fiscal burden that low-skill migration imposes on the fiscal system. However an important message of this paper is that in an infinite-horizon set-up, one cannot fully grasp the implications of migration for the welfare state, just by looking at the net fiscal burden that migrants impose on the fiscal system. In an infinite-horizon, overlapping generations economy, this net burden, could change to net gain to the native born population.
Keywords: welfare migration; net fiscal burden; economic impact; native born population
JEL Codes: F22; H3; I2
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| low-skill migration (J61) | dependency ratio (J19) |
| low-skill migration (J61) | net fiscal burden on the welfare state (J32) |
| dependency ratio (J19) | net gain for native-born population (J11) |
| low-skill migration (J61) | net beneficiaries of the welfare state (H55) |
| net fiscal burden on the welfare state (J32) | net gain for native-born population (J11) |