Working Paper: NBER ID: w16831
Authors: Assaf Razin; Jackline Wahba
Abstract: This paper tests the differential effects of the generosity of the welfare state under free migration and under policy-controlled migration, distinguishing between source developing and developed countries. We utilize free-movement within the EU to examine the free migration regime and compare that to immigration into the EU from two other groups, developed and developing source countries, to capture immigration-restricted regimes. We standardize cross-country education quality differences by using the Hanushek-Woessmann (2009) cognitive skills measure. We find strong support for the "Magnet Hypothesis" under the free-migration regime, and the "Fiscal Burden Hypothesis" under the immigration- restricted regime even after controlling for differences in returns to skills in source and host countries. We also find a significant differences across host-country policy regimes in the effects of returns to skills on the skill mix of immigrants.
Keywords: welfare state; migration; skill composition; free migration; policy-controlled migration
JEL Codes: F0; F2; F22; H10
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Generosity of the welfare state under free migration (D64) | Skill composition of migrants (J61) |
| High welfare benefits (I38) | Skill composition of migrants (J61) |
| Generosity of the welfare state under policy-controlled migration (I38) | Skill composition of migrants (J61) |
| Increases in welfare state generosity (I38) | Skill composition of migrants (J61) |
| Effect of welfare state generosity larger for developed countries (I38) | Skill composition of migrants (J61) |
| Controlling for educational quality (I21) | Skill composition of migrants (J61) |