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The Effect of Immigration on Economic Growth in an Ageing Economy

Joan Muysken and Thomas Ziesemer ()

Bulletin of Applied Economics, 2014, vol. 1, issue 1, 35-63

Abstract: Immigration can help to alleviate the burden ageing presents for the welfare states of most Western Economies. To show this, a macroeconomic model is developed which deals with the effect of both ageing and immigration on economic growth, through home-biased capital accumulation. The model includes a detailed description of the labor market, analyzing the interaction with low-skilled unemployment. The empirical relevance of some crucial model assumptions is shown to hold for the Netherlands, 1973 – 2009, using a vector-error-correction model. Simulations of the latter model show that permanent shocks in immigration will help to alleviate the ageing problem in the long run, as long as the immigrants will be able to participate in the labor force at least as much as the native population. Moreover, the better educated the immigrants are or become, the higher their contribution to growth will be.

Keywords: Ageing; Immigration; Unemployment; Skills (search for similar items in EconPapers)
JEL-codes: E24 F22 O15 O52 (search for similar items in EconPapers)
Date: 2014
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