The Role of Immigration in Sustaining the Social Security System: A Political Economy Approach

42 Pages Posted: 23 May 2008

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)

Edith Sand

Tel Aviv University - Eitan Berglas School of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: May 2007

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. 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; which in turn has a positive effect on the sustainability of the social security system.

Keywords: demographic stretegic voting, overlapping generations, social security sustainability

JEL Classification: E1, H3, P1

Suggested Citation

Razin, Assaf and Sand, Edith, The Role of Immigration in Sustaining the Social Security System: A Political Economy Approach (May 2007). CEPR Discussion Paper No. DP6302. Available at SSRN: https://ssrn.com/abstract=1136609

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 )

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CESifo (Center for Economic Studies and Ifo Institute)

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Germany

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

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Edith Sand

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

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

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