The Impact of Immigrants on Public Finances: A Forecast Analysis for Denmark

Marianne Frank Hansen (), Marie Louise Schultz-Nielsen and Torben Tranaes ()
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Marianne Frank Hansen: Danish Rational Economic Agents Model (DREAM)

No 8844, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: All over Europe, ageing populations threaten nations' financial sustainability. In this paper we examine the potential of immigration to strengthen financial sustainability. We look at a particularly challenging case, namely that of Denmark, which has extensive tax-financed welfare programmes that provide a high social safety net. The analysis is based on a forecast for the entire Danish economy made using a dynamic computable general equilibrium model with overlapping generations. Net contributions to the public purse are presented both as cross-sectional figures for a long time horizon and as average individual life-cycle contributions. The main conclusion is that immigrants from richer countries have a positive fiscal impact, while immigrants from poorer countries have a large negative one. The negative effect is caused by both a weak labour market performance and early retirement in combination with the universal Danish welfare schemes.

Keywords: welfare benefits; sustainable fiscal policy; immigration (search for similar items in EconPapers)
JEL-codes: E62 F22 J61 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2015-02
New Economics Papers: this item is included in nep-age, nep-eur, nep-mac, nep-mig and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Published - published in: Journal of Population Economics, 2017, 30 (3), 925-952

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Working Paper: The Impact of Immigrants on Public Finances: A Forecast Analysis for Denmark (2015)
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