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Can the rising pension burden in Europe be mitigated by immigration? Modelling the effects of selected demographic and socio-economic factors on ageing in the European Union, 2008-2050

Fernando Gil Alonso

Vienna Yearbook of Population Research, 2009, vol. 7, issue 1, 123-147

Abstract: Demographic change, and more specifically ageing - defined here as the increase in the numbers of retired people - is one of the main challenges which European societies must face. Although this challenge cannot be reduced to the demographic factor alone, the construction of highly sophisticated models to analyse the social and economic impact of ageing introduces problems of data availability and comparability between EU Member States. The approach used in this paper to overcome these obstacles is different. A demography-based model (inspired by Gérard Calot's previous work) which uses some simplified assumptions, has been defined to assess the implications of ageing for the 27 EU countries over the period 2008-2050, and the relative impact of a series of alternative measures which could be implemented to counteract ageing. Though the analysis will focus on labour supply growth through foreign (extra-EU) immigration, other actions like the increase of the average effective age at which the labour market is left or employment rate growth will also be taken into account. Results show that immigration by itself cannot counteract ageing in the European Union as the number of immigrants needed to compensate for the increasing number of retired people would be so high that no country could assume the social and political costs of such a process. However, it can play a complementary role if it is combined with other measures contributing to both increase labour participation and delay retirement. This policy mix should be different in each EU Member State depending on the initial specific situation of each parameter of the model.

Date: 2009
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