The Welfare State and Migration: A Dynamic Analysis of Political Coalitions

Assaf Razin, Efraim Sadka and Benjarong Suwankiri

No 10429, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We develop a dynamic political-economic theory of welfare state and immigration policies, featuring three distinct voting groups: skilled workers, unskilled workers, and old retirees. The essence of inter - and intra-generational redistribution of a typical welfare system is captured with a proportional tax on labor income to finance a transfer in a balanced-budget manner. We provide an analytical characterization of political-economic equilibrium policy rules consisting of the tax rate, the skill composition of migrants, and the total number of migrants. When none of these groups enjoy a majority (50 percent of the voters or more), political coalitions will form. With overlapping generations and policy-determined influx of immigrants, the formation of the political coalitions changes over time. These future changes are taken into account when policies are shaped. Naturally, a lower rate of population growth (that is, an aging population) increases the political clout of the old (the left group). But it also increases the burden on the young (particularly, the skilled).

Keywords: Center; Dynamics of left and right coalitions; Intra- and inter-generational transfers (search for similar items in EconPapers)
JEL-codes: E10 F15 H10 (search for similar items in EconPapers)
Date: 2015-02
New Economics Papers: this item is included in nep-age, nep-cdm, nep-mac, nep-mig, nep-pbe and nep-pol
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: The welfare state and migration: A dynamic analysis of political coalitions (2016)
Working Paper: The Welfare State and Migration: A Dynamic Analysis of Political Coalitions (2014)
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