The Welfare State and Migration: Coalition-formation dynamics

Assaf Razin

No 215, 2015 Meeting Papers from Society for Economic Dynamics

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 nance 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.

Date: 2015
New Economics Papers: this item is included in nep-age, nep-cdm, nep-dge, nep-ltv, nep-mig, nep-pbe and nep-pol
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