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Pareto-Improving Immigration and Its Effect on Capital Accumulation in the Presence of Social Security

69 Pages Posted: 6 Sep 2014  

Hisahiro Naito

University of Tsukuba

Multiple version iconThere are 2 versions of this paper

Date Written: September 2014

Abstract

The effect of accepting more immigrants on welfare in the presence of a pay-as-you-go social security system is analyzed qualitatively and quantitatively. First, it is shown that if initially there exist intergenerational government transfers from the young to the old, the government can lead an economy to the (modified) golden rule level within a finite time in a Pareto-improving way by increasing the percentage of immigrants to natives (PITN). Second, using the computational overlapping generation model, the welfare gain is calculated of increasing the PITN from 15.5 percent to 25.5 percent and years needed to reach the (modified) golden rule level in a Pareto-improving way in a model economy. The simulation shows that the present value of the welfare gain of increasing the PITN comprises 23 percent of the initial GDP. It takes 112 years for the model economy to reach the golden rule level in a Pareto-improving way.

Suggested Citation

Naito, Hisahiro, Pareto-Improving Immigration and Its Effect on Capital Accumulation in the Presence of Social Security (September 2014). Tokyo Center for Economic Research (TCER) Paper No. E-81. Available at SSRN: https://ssrn.com/abstract=2492166

Hisahiro Naito (Contact Author)

University of Tsukuba ( email )

Tennodai 1-1-1
Tsukuba City, Ibaraki Prefecture
Japan
81-29-853-7431 (Phone)

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