Aging and Immigration Policy in a Representative Democracy

Lena Calahorrano ()
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Lena Calahorrano: RWTH Aachen University

No 201018, MAGKS Papers on Economics from Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung)

Abstract: 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 government’s 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 workers then benefit from sharing the burden of pension contributions with the immigrants.

Keywords: Demographic Change; Political Economy; Immigration Policy (search for similar items in EconPapers)
JEL-codes: D78 F22 J1 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2010
New Economics Papers: this item is included in nep-age, nep-dge, nep-mig and nep-pol
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:mar:magkse:201018

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