The Welfare State and Migration: A Dynamic Analysis of Political Coalitions

36 Pages Posted: 5 Jan 2015 Last revised: 8 May 2023

See all articles by Assaf Razin

Assaf Razin

Tel Aviv University - Eitan Berglas School of Economics; National Bureau of Economic Research (NBER); CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR)

Efraim Sadka

Tel Aviv University - Eitan Berglas School of Economics; National Bureau of Economic Research (NBER); CESifo (Center for Economic Studies and Ifo Institute); IZA Institute of Labor Economics

Ben Suwankiri

Cornell University - Department of Economics; TMB Bank Pub. Co. Ltd.

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Date Written: December 2014

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 finance a transfer in a balanced-budget manner. We characterize 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. The paper characterizes the evolution of the political coalitions that implement welfare state and migration policies.

Suggested Citation

Razin, Assaf and Sadka, Efraim and Suwankiri, Benjarong, The Welfare State and Migration: A Dynamic Analysis of Political Coalitions (December 2014). NBER Working Paper No. w20806, Available at SSRN: https://ssrn.com/abstract=2545184

Assaf Razin (Contact Author)

Tel Aviv University - Eitan Berglas School of Economics ( email )

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Efraim Sadka

Tel Aviv University - Eitan Berglas School of Economics ( email )

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Israel
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National Bureau of Economic Research (NBER)

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CESifo (Center for Economic Studies and Ifo Institute)

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Germany

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IZA Institute of Labor Economics

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Benjarong Suwankiri

Cornell University - Department of Economics ( email )

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