Working Paper: NBER ID: w29162
Authors: Assaf Razin; Alexander Horst Schwemmer
Abstract: It has been well recognized that population ageing could generate structural changes centered around the dwindling labor force, on one hand, and the expanding dependency on the generosity of the welfare state, on the other hand. Ageing-related welfare state policy entails both fiscal issues and migration issues. The paper employs a general-equilibrium model with a policy-making focus, to help understand the mechanism governing the provision of social benefits, labor income taxation, capital income taxation, migration curbs on low skilled and high skilled, driven by the ageing of the population. Greater generosity of the welfare state comes together with policy of a more liberal migration policy — incentive compatible with the interests of the majority voters.
Keywords: Ageing; Welfare State; Migration Policy; General Equilibrium Model
JEL Codes: F3; H0
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| population ageing (J11) | welfare state generosity (I38) |
| welfare state generosity (I38) | migration policy liberalization (F22) |
| population ageing (J11) | demand for immigrants (J69) |
| dependency ratio (J19) | reliance on immigration (K37) |
| voters dependent on social benefits (P36) | support for liberal migration policy (F22) |
| migration policy type (F22) | native voter interests (K16) |