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Cross-country differences in the contribution of future migration to old-age financing

Johannes Berger (), Thomas Davoine (), Philip Schuster () and Ludwig Strohner ()
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Johannes Berger: EcoAustria - Institute for Economic Research
Philip Schuster: Office of the Austrian Fiscal Advisory Council, c/o Oesterreichische Nationalbank
Ludwig Strohner: EcoAustria - Institute for Economic Research

International Tax and Public Finance, 2016, vol. 23, issue 6, 1160-1184

Abstract: Abstract As life expectancy increases and fertility declines, population aging puts pressure on the financing of welfare states in Europe and other developed countries. Given that immigrant workers are younger than the domestic population, a continuous flow of immigrants reduces the old-age dependency ratio and improves financing. Existing general equilibrium estimates of the public finance contribution of migration, performed with different models, are not comparable across countries and sometimes differ even in sign. We use the same overlapping-generations model with a detailed representation of institutions and labor market activity to provide comparable estimates of the impact of immigration on public finance in four European countries. We find that future projected immigration flows are equivalent to 14.3 % points labor income taxes in Austria, 7.3 points in Germany, 6.2 points in the UK and 1.7 points in Poland in 2060. These differences are due to the projected volume of immigration and institutional setups, among other factors. For comparable volumes of immigration, future flows have largest impact in Germany and smallest in the UK.

Keywords: Immigration; Population aging; Social security financing; General equilibrium; Cross-country comparisons (search for similar items in EconPapers)
JEL-codes: D58 E60 H55 J11 J21 J61 (search for similar items in EconPapers)
Date: 2016
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Handle: RePEc:kap:itaxpf:v:23:y:2016:i:6:d:10.1007_s10797-016-9394-3