 Political Economy of Immigration and Fiscal SustainabilityJinwook Hur KDI Journal of Economic Policy, 2022, vol. 44, issue 1, 1-47 Abstract: This paper introduces a politico-economic model with a welfare state and immigration. In this model, policies on taxes and immigration are determined through a plurality voting system. While many studies of fiscal implications of immigration argue that relaxing immigration policies can substitute for tax reforms in an aging economy, I show that the democratic voting procedure can dampen the effect of relaxing immigration policies as desired policy reforms are not always implemented by the winner of an election. This political economy results in three types of social welfare losses. First, the skill composition is not balanced at a socially efficient level because workers are motivated to maximize their wages. Second, older retirees implement excessive taxes to maximize the size of the welfar e state. Third, the volume of immigration is lower than the optimallevel given the incentive by young workers to regain political power in the future. Keywords: Immigration; Political Economy; Fiscal Sustainability (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:zbw:kdijep:251901 DOI: 10.23895/kdijep.2022.44.1.1 Access Statistics for this article KDI Journal of Economic Policy is currently edited by Dongseok Kim More articles in KDI Journal of Economic Policy from Korea Development Institute (KDI) Contact information at EDIRC. |
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