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Aging and immigration policy in a representative democracy

: Calahorrano, Lena

Fulltext urn:nbn:de:0011-n-4390559 (254 KByte PDF)
MD5 Fingerprint: b3769f2516a275e5315e9cf03a904a50
Created on: 5.4.2017

Marburg, 2010, 27 pp.
Joint Discussion Paper Series in Economics, 18-2010
Report, Electronic Publication
Fraunhofer FIT ()

This paper analyzes how population aging affects immigration policy in rich industrialized countries. It sets up a two-period model of a representative democracy with two overlapping generations. The governments preferred immigration rate increases with the share of retirees in the population. The paper differentiates between an economy without a pension system and one with pay-as-you-go pensions. As immigrants have more children than natives, the chosen immigration rate is contingent on the design of the pension system. If pension contributions and benefits are set freely by the government, equilibrium immigration is lower than it is in the absence of a pension system. On the contrary, it is higher if the pension level is fixed ex ante to a relatively generous level, since native worker s then benefit from sharing the burden of pension contributions with the immigrants.