Aging, Factor Returns, and Immigration Policy

18 Pages Posted: 3 Sep 2011

Date Written: November 2011

Abstract

Immigration has various economic and non‐economic effects on the destination country's inhabitants. In this paper, we focus on the impact of immigration on factor returns and analyze how aging affects immigration policy, employing a dynamic political‐economy model of representative democracy. Aging, that is, a decline in the growth rate of the native population, has an expansionary effect on immigration in this framework. This immigration effect may even overcompensate the initial contraction of the labor force. We show that the immigration rate in the representative democracy equilibrium exceeds the immigration rate that would maximize welfare of current and future generations, and we also discuss the influence of social security on immigration policy.

Suggested Citation

Calahorrano, Lena and Lorz, Oliver, Aging, Factor Returns, and Immigration Policy (November 2011). Scottish Journal of Political Economy, Vol. 58, Issue 5, pp. 589-606, 2011, Available at SSRN: https://ssrn.com/abstract=1921694 or http://dx.doi.org/10.1111/j.1467-9485.2011.00560.x

Lena Calahorrano (Contact Author)

RWTH Aachen ( email )

Aachen
Germany

Oliver Lorz

RWTH Aachen University ( email )

Templergraben 55
D-52056 Aachen, 52056
Germany

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