Immigration and the Survival of Social Security: A Political Economy Model

Edith Sand () and Assaf Razin

No 12800, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: In the political debate people express the idea that immigrants are good because they can help pay for the old. The paper explores this idea in a dynamic political-economy setup. For this purpose we develop an OLG political economy model of social security and migration. We characterize sub-game perfect Markov equilibria where immigration policy and pay-as-you-go (PAYG) social security system are jointly determined through a majority voting process. The main feature of the model is that immigrants are desirable for the sustainability of the social security system because the political system is able to manipulate the ratio of old to young and thereby the coalition which supports future high social security benefits. We demonstrate that the older is the native born population the more likely is that the immigration policy is liberalized and the social security system survives.

JEL-codes: F22 H55 (search for similar items in EconPapers)
Date: 2006-12
New Economics Papers: this item is included in nep-pbe and nep-pol
Note: IFM
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Citations: View citations in EconPapers (3)

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