Working Paper: NBER ID: w13598
Authors: Edith Sand; Assaf Razin
Abstract: In the political-economy debate people express the idea that immigrants are good because they can help pay for the old, thus help sustaining the social security system. In addition, the median voter whose income derives from wages will wish to keep out the immigrants who will depress his/her wage. Therefore the decisive voter will keep migrants out. The paper addresses these two accepted propositions. For this purpose we develop an OLG political economy model of social security and migration to explore how migration policy and a pay-as-you-go (PAYG) social security system are jointly determined. The sub-game perfect Markov , depends on the different patterns of fertility rates among native born and migrants. Our analysis demonstrates that a social security system may change the first proposition significantly because the median voter may opt to bring in migrants to help him/her during retirement. As for the second proposition we get a significantly nuanced version. Not always immigration helps sustain the social security.
Keywords: Social Security; Immigration; Political Economy; Demographic Changes
JEL Codes: E6; H1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Social Security System (H55) | Median Voter's Decision-Making Process Regarding Immigration (K37) |
| Median Voter's Preferences (D72) | Immigration Quotas and Tax Policies (K37) |
| Demographic Changes (J11) | Median Voter's Preferences (D72) |
| Immigration Policy (K37) | Sustainability of Social Security System (H55) |
| Demographic Growth Rates (J11) | Immigration Policy and Social Security Benefits (H55) |