Alternating Migration Flows and their Age-Structure Effects on the Long-Term Sustainability of the German Statutory Pension Insurance

Jan Valentin Vogt

No 10369, EcoMod2017 from EcoMod

Abstract: Besides fertility and mortality, migration is a key influence to demography. It changes both population size and age structure. Nonetheless, demographic parts of macroeconomic long-term pension simulations for Germany have not fully taken into account that the age structure resulting from alternating migration flows has a reasonably different shape than the one resulting from constant migration scenarios – especially, when labour market participation heterogeneity across the duration of stay is taken into account. Thus, this contribution aims to answer the question up to which extent the differences between alternating and constant migration scenarios affect the results of long-term projections of the German statutory pension insurance system. This contribution makes use of regularities in the relation between the size of a migration flow and its relative age structure. These regularities allow a parametrisation of the age profiles with a few intuitive parameters. With this parametrisation, alternating migration scenarios reaching until 2060 are created together with their constant counterparts, which share the same average size. The simulation model applied here consists of a cohort-component population projection, a Solow-Swan growth model, a projection of the labour market participation via entry and exit rates considering heterogeneity across age, gender and duration of stay of immigrants, and a detailed calculation of the pension insurance's budget via average lifetime earnings profiles for each cohort. The main target variables for an assessment of the pension insurance’s sustainability are the contribution rate and the insurance level under a balanced budget constraint. The simulations show a reasonable effect of the different age structure on both target variables in the alternating scenarios. This might lead to an underestimation of the effects of immigration on the sustainability of the German statutory pension insurance.

Keywords: Germany; Forecasting; nowcasting; Impact and scenario analysis (search for similar items in EconPapers)
Date: 2017-07-04
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