The Political-Economy Positive Role of the Social Security System in Sustaining Immigration (But Not Vice Versa)

44 Pages Posted: 14 Nov 2007 Last revised: 29 Aug 2010

See all articles by Edith Sand

Edith Sand

Tel Aviv University - Eitan Berglas School of Economics

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)

Date Written: November 2007

Abstract

In the political-economy debate people express the idea that immigrants are good because they can help pay for the old, thus help sustaining the social security system. In addition, the median voter whose income derives from wages will wish to keep out the immigrants who will depress his/her wage. Therefore the decisive voter will keep migrants out. The paper addresses these two accepted propositions. For this purpose we develop an OLG political economy model of social security and migration to explore how migration policy and a pay-as-you-go (PAYG) social security system are jointly determined. The sub-game perfect Markov , depends on the different patterns of fertility rates among native born and migrants. Our analysis demonstrates that a social security system may change the first proposition significantly because the median voter may opt to bring in migrants to help him/her during retirement. As for the second proposition we get a significantly nuanced version. Not always immigration helps sustain the social security.

Suggested Citation

Sand, Edith and Razin, Assaf, The Political-Economy Positive Role of the Social Security System in Sustaining Immigration (But Not Vice Versa) (November 2007). NBER Working Paper No. w13598. Available at SSRN: https://ssrn.com/abstract=1029939

Edith Sand

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

P.O. Box 39040
Ramat Aviv, Tel Aviv, 69978
Israel

Assaf Razin (Contact Author)

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

P.O. Box 39040
Ramat Aviv, Tel Aviv, 69978
Israel
+972 3 640 7303 (Phone)
+972 3 640 9908 (Fax)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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