DP7310 Migration-Regime Liberalization and Social Security: Political-Economy Effect

Author(s): Assaf Razin, Edith Sand
Publication Date: June 2009
Keyword(s): Demographic Imbalance, Pay-As-You-Go Social Security System, Repeated Voting
JEL(s): F22, H55, J11, P16
Programme Areas: International Macroeconomics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=7310

The pay-as-you-go social security system, burdened by dwindling labour force, can benefit from immigrants, with birth rates that exceed the native-born birth rates. Thus, the social security system effectively provides an incentive to liberalize migration policy through a political-economy mechanism. The paper examines a dynamic political-economy mechanism through which the social security system influences the young decisive voter's attitudes in favour of a more liberal immigration regime. A Markov equilibrium with social security consists of a more liberal migration policy, than a corresponding equilibrium with no social security.