Migration and the Welfare State: Dynamic Political-Economy Theory

33 Pages Posted: 30 Mar 2010

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: March 2010

Abstract

We model an overlapping-generations economy with two skill levels: skilled and unskilled. The welfare-state is modeled simply by a proportional tax on labor income to finance a demogrant in a balanced-budget manner. Therefore, some (the unskilled workers and old retirees) are net beneficiaries from the welfare state and others (the skilled workers) are net contributors to it.

Migration policies are set to determine the total migration volume and its skill composition. We characterize subgame-perfect Markov political-economic equilibria consisting of the tax rate (which determines the demogrant), skill composition and the total number of migrants. We distinguish between two voting behaviors: sincere and strategic voting.

JEL Classification: H00, F20, F13

Suggested Citation

Razin, Assaf and Sadka, Efraim and Suwankiri, Benjarong, Migration and the Welfare State: Dynamic Political-Economy Theory (March 2010). CESifo Working Paper Series No. 2991. Available at SSRN: https://ssrn.com/abstract=1577582

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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Cambridge, MA 02138
United States

CESifo (Center for Economic Studies and Ifo Institute)

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Munich, DE-81679
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HOME PAGE: http://www.CESifo.de

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Efraim Sadka

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

P.O. Box 39040
Ramat Aviv, Tel Aviv, 69978
Israel
+972 3 640 9712 (Phone)
+972 3 642 8074 (Fax)

National Bureau of Economic Research (NBER)

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

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Benjarong Suwankiri

Cornell University - Department of Economics ( email )

414 Uris Hall
Ithaca, NY 14853-7601
United States

TMB Bank Pub. Co. Ltd. ( email )

3000 Phahonyothin Rd.
Chomphon,Chatuchak
Bangkok, 10900
Thailand

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