The migration challenge for PAYG

Gurgen Aslanyan

Journal of Population Economics, 2014, vol. 27, issue 4, 1023-1038

Abstract: Immigration has been popularised in the economics literature as a tool that could be used to balance troubled PAYG pension systems. Pivotal research by Razin and Sadka shows that unskilled immigration can overcome the pension problem and, further, boost the general welfare in the host economy. However, a large strand of current economics research is engaged in identifying mechanisms through which unskilled immigration, while solving the pension problem, is causing undesired shifts in general welfare. This work shows that recurring unskilled immigration will not only reduce the general welfare but may also be challenging the pension system by reducing the pension benefits themselves. Further interpreting the actual data, it is suggested that immigration policies are designed either based on public finances only or in a political environment of gerontocracy. Copyright Springer-Verlag Berlin Heidelberg 2014

Keywords: Public pensions; PAYG; Unskilled migration; Capital dilution; J18; F22; H55 (search for similar items in EconPapers)
Date: 2014
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DOI: 10.1007/s00148-014-0516-x

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