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: www.cepr.org/pubs/dps/DP7310.asp.asp

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.