Sustaining Fiscal Policy Through Immigration

Kjetil Storesletten

No 664, Seminar Papers from Stockholm University, Institute for International Economic Studies

Abstract: This paper explores the fiscal implications of immigration to the US and argues that immigration policy should be viewed as a vital part of fiscal policy. In particular a case is made that skills and age at the time of arrival are of great importance for the cost-benefit calculation of new immigrants. Using a calibrated general equilibrium overlapping generations model, which explicitly accounts for key differences between immigrants and natives, Social Security and the demographic transition, I investigate if an immigration policy reform alone could resolve the fiscal problems associated with the ageing of the baby boom generation I find that such policies exist and are characterized by increased inflows of working-age high and medium skilled immigrants. One particular feasible policy involves admitting 1.6 million 40-44 year-old high skilled immigrants annually compared to a total of 1.1 million today. In contrast an income tax hike of 4.4% points would be required if future fiscal problems were to be solved by a once and for all tax reform. To further illuminate the fiscal impact of immigration I compute the net government gain in present value terms of admitting one additional immigrant. This figure varies considerably with age and skills and reaches a maximum of seven times GNP per capita for high skilled 40-44 year-old immigrants. In contrast new immigrants represent on average a small net gain of $7,400 or 0.3 times GNP per capita.

Keywords: fiscal policy; immigration (search for similar items in EconPapers)
JEL-codes: F22 H20 H50 J15 (search for similar items in EconPapers)
Pages: 41 pages
Date: 1998-09-04
New Economics Papers: this item is included in nep-pbe and nep-pke
References: View references in EconPapers View complete reference list from CitEc
Citations:

Published in Journal of Political Economy, 2000, pages 300-323.

Downloads: (external link)
http://su.diva-portal.org/smash/get/diva2:328264/FULLTEXT01 (application/pdf)
http://www.iies.su.se/~storeslk/papers/sfpti.pdf Revised version of the paper (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.iies.su.se/~storeslk/papers/sfpti.pdf [301 Moved Permanently]--> https://www.iies.su.se/~storeslk/papers/sfpti.pdf)

Related works:
Journal Article: Sustaining Fiscal Policy through Immigration (2000)
Working Paper: Sustaining Fiscal Policy Through Immigration
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hhs:iiessp:0664

Access Statistics for this paper

More papers in Seminar Papers from Stockholm University, Institute for International Economic Studies Institute for International Economic Studies, Stockholm University, S-106 91 Stockholm, Sweden. Contact information at EDIRC.
Bibliographic data for series maintained by Hanna Christiansson ().