Estimating the impact of immigrants on the host country social security system when return migration is an endogenous choice

Kirdar, Murat G. (2008): Estimating the impact of immigrants on the host country social security system when return migration is an endogenous choice.

Abstract

In this paper, I examine the impact of immigrants on the social security system in Germany when return migration is an endogenous choice. For this purpose, I develop a dynamic stochastic model of joint return migration and saving decisions that accounts for uncertainty in future employment and income and estimate this model using a longitudinal dataset on immigrants from five different source countries. I find that immigrants make positive net contributions to both the pension and unemployment insurance systems in Germany regardless of their country of origin and age-at-entry. Moreover, the magnitudes of the net contributions are remarkable for certain groups. Return migration plays a critical role in generating these positive net contributions. In a counterfactual, I examine how much exogenous modeling of the return decision, which has been the practice of the literature so far, changes immigrants’ net contributions. Such a restriction causes a serious misestimation of net contributions. I also examine the impact of a counterfactual policy experiment in which financial bonuses are provided conditional on return to certain unemployed immigrants. Such a policy turns out to be ineffective in a number of dimensions.

• Item Type: MPRA Paper
• Language: English
• Keywords: Immigrant Workers, Life Cycle Models and Saving, Social Security and Public Pensions, Unemployment Insurance, Public Policy
• Subjects: H - Public Economics > H5 - National Government Expenditures and Related Policies > H55 - Social Security and Public Pensions; J - Labor and Demographic Economics > J6 - Mobility, Unemployment, Vacancies, and Immigrant Workers > J65 - Unemployment Insurance ; Severance Pay ; Plant Closings; J - Labor and Demographic Economics > J6 - Mobility, Unemployment, Vacancies, and Immigrant Workers > J61 - Geographic Labor Mobility ; Immigrant Workers; D - Microeconomics > D9 - Intertemporal Choice > D91 - Intertemporal Household Choice ; Life Cycle Models and Saving

References

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