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

45 Pages Posted: 15 May 2007

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)

Multiple version iconThere are 2 versions of this paper

Date Written: April 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 the native-born population is, the more likely the immigration policy is to be liberalized, which in turn has a positive effect on the sustainability of the social security system.

JEL Classification: H10

Suggested Citation

Sand, Edith and Razin, Assaf, The Role of Immigration in Sustaining the Social Security System: A Political Economy Approach (April 2007). CESifo Working Paper Series No. 1979. Available at SSRN: https://ssrn.com/abstract=986548

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

Register to save articles to
your library

Register

Paper statistics

Downloads
129
Abstract Views
864
rank
216,885
PlumX Metrics