Immigration and Growth in an Aging Economy

Abstract:     
This paper argues that immigration can help to alleviate the burden aging presents for the welfare states of most Western Economies. We develop a macroeconomic framework which deals with the impact of both aging and immigration on economic growth. This is combined with a detailed model of the labor market, to include the interaction with low-skilled unemployment. The empirical relevance of some crucial model assumptions is shown to hold for the Netherlands, 1973–2007. The conclusions are that immigration will help to alleviate the aging problem, as long as the immigrants will be able to participate in the labor force at least as much as the native population. Moreover, the better educated the immigrants are or become, the higher their contribution to growth will be.

Number of Pages in PDF File: 41

Keywords: ageing population, immigration, unemployment, skills

JEL Classification: E24, F22, O15, O52

working papers series