Migration, Social Security, and Economic Growth

Chen, Hung-Ju and Fang, I-Hsiang (2011): Migration, Social Security, and Economic Growth.

Abstract

This paper studies the effect of population aging on economic performance in an overlapping-generations model with international migration. Fertility is endogenized so that immigrants and natives can have different fertility rates. Fertility is an important determinant to the tax burden of social security since it affects the quantity and quality of future tax payers. We find that introducing immigrants into the economy can reduce the tax burden of social security. If life expectancy (or the replacement ratio) is high enough, the growth rate of GDP per worker for an economy with international migration will be higher than for a closed economy. Regarding migration policies, our numerical results indicate that economic growth rate of GDP per worker will first decrease then increase as the flow of immigrants increases. Increasing the quality of immigrants will enhance economic growth.

• Item Type: MPRA Paper
• Language: English
• Keywords: Economic growth; Fertility; Migration; Social security.
• Subjects: F - International Economics > F2 - International Factor Movements and International Business > F22 - International Migration; H - Public Economics > H5 - National Government Expenditures and Related Policies > H55 - Social Security and Public Pensions; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O15 - Human Resources ; Human Development ; Income Distribution ; Migration

References

Becker, G., Murphy, K., Tamura, R., 1990. Human capital, fertility and economic growth. Journal of Political Economy 98, 12-37. Blanchard, O., 1985. Debt, deficits and finite horizons. Journal of Political Economy 93, 223-47. Borjas, G.J., 1993. Immigration policy, national origin, and immigrants skills: a comparison of Canada and the United States. In: Card, D., Freeman, R. (Eds), Small Differences that Matter: Labor Markets and Income Maintenance in Canada and the United States, University of Chicago Press, pp.21-44. Borjas, G.J., 1994. Long-run convergence of ethnic skill differentials: the children and grand-children of the great migration. Industrial and Labor Relations Review 47, 553-573. Card, D. and Krueger, A.B., 1996. School resources and student outcomes: an overview of the literature and new evidence from North and South Carolina. Journal of Economic Perspectives 10, 31-50. Chen, H.-J., 2005. Educational systems, growth and income distribution: a quantitative study. Journal of Development Economics 76, 325-353. de la Croix, D., Doepke, M., 2003. Inequality and growth: why differential fertility matters. American Economic Review 93, 1091-113. de la Croix, D., Doepke, M., 2004. Public versus private education: when differential fertility matters. Journal of Development Economics 73, 607-29. Doi, J., Ikefuji, M., Mizushima, A., Mochida, M., 2006. Immigration, Aging, and Growth. Discussion Paper No. 143, Osaka University. Ehrlich, I., Lui, F.T., 1991. Intergenerational trade, longevity and economic growth. Journal of Political Economy 99, 1029-59. Fenge, R., Meier, V., 2005. Pensions and fertility incentives. Canadian Journal of Economics 38, 28-48. Glomm, G., Ravikumar, B., 1992. Public versus private investment in human capital: endogenous growth and income inequality. Journal of Political Economy 100, 818-834. Groezen, B., Leers, T., Meijdam, L., 2003. Social security and endogenous fertility: pensions and child allowances as Siamese twins. Journal of Public Economics 87, 233-251. Haveman, R., Wolfe, B., 1995. The determinants of children’s attainments: a review of methods and findings. Journal of Economic Literature 33, 1829-1878. Kaganovich, M., Zilcha, I., 1999. Education, social security, and growth. Journal of Public Economics 71, 289-309. Kendrick, J.W., 1976. The Formation and Stocks of Total Capital, New York: Columbia University Press. Krueger, A.B. and Lindahl, M., 2001. Education and growth: why and for whom? Journal of Economic Literature 39, 1101-1136. Lee, R., Miller T., 2000. Immigration, social security, and broader fiscal impacts. American Economic Review 90, 350-354. Mochida, M., 2005. Child allowances, fertility, and uncertain lifetime. Discussion Paper 05-11, Osaka University. Pecchenino, R.A., Pollard, P.S., 2002. Dependent children and aged pares: funding education and social security in an aging economy. Journal of Macroeconomics 24, 145-169. Razin, A., Sadka, E., 1999. Migration and pension with international capital mobility. Journal of Public Economics 74, 141-15. Storesleten, K., 2000. Sustaining fiscal policy through immigration. Journal of Political Economy, 108:300-323. Yarri, M.E., 1965. Uncertain lifetime, life insurance and the theory of the consumer. Review of Economic Studies 32, 137-50. Zhang, J., Zhang, J., 2003. Long-run effects of unfunded social security with earnings-dependent benefits. Journal of Economic Dynamics and Control 28, 617-641. Zhang, J., Zhang, J., Lee, R., 2003. Rising longevity, education, savings and growth. Journal of Development Economics 70, 83-101.