Aging and Immigration Policy in a Representative Democracy

This paper analyzes how population aging affects immigration policy in rich industrialized countries. It sets up a two-period model of a representative democracy with two overlapping generations. The government’s preferred immigration rate increases with the share of retirees in the population. The paper differentiates between an economy without a pension system and one with pay-as-you-go pensions. As immigrants have more children than natives, the chosen immigration rate is contingent on the design of the pension system. If pension contributions and benefits are set freely by the government, equilibrium immigration is lower than it is in the absence of a pension system. On the contrary, it is higher if the pension level is fixed ex ante to a relatively generous level, since native workers then benefit from sharing the burden of pension contributions with the immigrants.Demographic Change, Political Economy, Immigration Policy

Aging, Factor Returns, and Immigration Policy

In this note we analyze how aging affects immigration policy. We set up a dynamic political-economy model of representative democracy in which the government of the destination country sets the immigration level to maximize aggregate welfare of the constituency. Aging, i.e. a decline in the growth rate of the native population, has an expansionary effect on immigration. This immigration effect may even overcompensate the initial decline in population growth such that the total labor force grows more strongly and the capital stock per worker declines. We also compare our results to the social planner allocation and to the median-voter equilibrium.Demographic change, political economy, immigration policy

Why Don't Labor and Capital Flow Between Young and Old Countries?

To counter the effects of population aging in rich industrialized countries, raising immigration from and raising capital exports to younger developing countries are often seen as alternative solutions. In this paper, we explicitly account for mobility constraints in the form of immigration restrictions in industrialized countries and expropriation risk in developing countries to investigate whether efficiency gains from factor movements are likely to be realized. We set up a one-period general equilibrium model of two economies with young and old individuals. Emigration from the developing country weakens its young generation's expropriation preferences, permitting more FDI. However, if the bulk of capital is invested abroad, the old investor's utility gain from immigration is low. Our model suggests that large differences in age structures do not unambiguously encourage large factor flows, when the level of factor flows is determined by policy. --Demographic Change,Political Economy,Immigration Policy,International Investment

Demographics and Factor Flows – A Political Economy Approach

We investigate the effect of population aging on international factor flows in a political-economy framework. Political barriers to immigration in developed countries and insecure property rights in developing countries impede factor flows. Taking into account different generations’ conflicting attitudes towards immigration and expropriation, we explore how these policy barriers interact. We find that incentives to expropriate increase as more emigration from the developing country takes place. Meanwhile, the industrialized country admits less immigrants as less capital is allocated to the developing country. Furthermore, the effects of population aging on international factor flows are considerably underestimated if one does not take into consideration the interactions between immigration and expropriation policies.Demographic change; political economy; migration; foreign direct investment

Why Don’t Labor and Capital Flow Between Young and Old Countries?

In this paper we investigate the twofold effect of demographics on international factor flows in a model with endogenous policy constraints on both foreign direct investment and migration. Factor price differences between industrialized and developing countries create economic incentives for migration to developed countries and for capital flows to less developed countries. However, political barriers to immigration in developed countries and expropriation risks in developing countries impede labor and capital flows. Using a political economy approach that takes into account different generations’ conflicting attitudes towards immigration and expropriation, we explore how these policy restrictions interact. We find that, in the presence of mobility constraints, larger demographic differences between countries need not result in an increase of factor flows

How to Tackle the Gulf of Aden Buccaneers

The surge of maritime piracy in the Gulf of Aden is often related to lawlessness and poverty in Somalia. We set up a simple model to describe the choice of becoming a pirate in a setting with an industrialized and a developing country which both engage in fishing in the same waters. As a result of fishing competition, maritime piracy as an alternative to fishing becomes more attractive in the developing country. We further investigate possible measures for the industrialized country to deal with piracy. --Maritime Piracy,Expropriation,Migration

Population Aging and Individual Attitudes toward Immigration: Disentangling Age, Cohort and Time Effects

In the face of rising old-age dependency ratios in industrialized countries like Germany, politicians and their electorates discuss the loosening of immigration policies as one policy option to ensure the sustainability of public social security systems. The question arises whether this policy option is feasible in aging countries: older individuals are typically found to be more averse to immigration. However, cross-sectional investigations may confound age with cohort effects. This investigation uses the 1999-2008 waves of the German Socio-Economic Panel to separate the effect of age on immigration attitudes from cohort and also from time effects. Over the life cycle stated immigration concerns are predicted to increase well into retirement and decrease afterward. Relative to other issues, immigration concerns are found to actually decrease over the life cycle

Aging and Immigration Policy in a Representative Democracy

This paper analyzes how population aging affects immigration policy in rich industrialized countries. It sets up a two-period model of a representative democracy with two overlapping generations. The government’s preferred immigration rate increases with the share of retirees in the population. The paper differentiates between an economy without a pension system and one with pay-as-you-go pensions. As immigrants have more children than natives, the chosen immigration rate is contingent on the design of the pension system. If pension contributions and benefits are set freely by the government, equilibrium immigration is lower than it is in the absence of a pension system. On the contrary, it is higher if the pension level is fixed ex ante to a relatively generous level, since native workers then benefit from sharing the burden of pension contributions with the immigrants

Population Aging and Individual Attitudes toward Immigration: Disentangling Age, Cohort and Time Effects

49 pagesImmigration, Demographic Change, Political Economy

Aging, Factor Returns, and Immigration Policy

In this note we analyze how aging affects immigration policy. We set up a dynamic political-economy model of representative democracy in which the government of the destination country sets the immigra- tion level to maximize aggregate welfare of the constituency. Aging, i.e. a decline in the growth rate of the native population, has an ex- pansionary effect on immigration. This immigration effect may even overcompensate the initial decline in population growth such that the total labor force grows more strongly and the capital stock per worker declines. We also compare our results to the social planner allocation and to the median-voter equilibrium