Political Economy of Immigration and Fiscal Sustainability

Artikel

This paper introduces a politico-economic model with a welfare state and immigration. In this model, policies on taxes and immigration are determined through a plurality voting system. While many studies of fiscal implications of immigration argue that relaxing immigration policies can substitute for tax reforms in an aging economy, I show that the democratic voting procedure can dampen the effect of relaxing immigration policies as desired policy reforms are not always implemented by the winner of an election. This political economy results in three types of social welfare losses. First, the skill composition is not balanced at a socially efficient level because workers are motivated to maximize their wages. Second, older retirees implement excessive taxes to maximize the size of the welfar e state. Third, the volume of immigration is lower than the optimallevel given the incentive by young workers to regain political power in the future.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Journal: KDI Journal of Economic Policy ; ISSN: 2586-4130 ; Volume: 44 ; Year: 2022 ; Issue: 1 ; Pages: 1-47 ; Sejong: Korea Development Institute (KDI)

Classification and Topics

• Classification: Wirtschaft ; Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: General ; International Migration ; Taxation, Subsidies, and Revenue: General ; Geographic Labor Mobility; Immigrant Workers ; Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
• Subject: Immigration ; Political Economy ; Fiscal Sustainability

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Hur, Jinwook
• Event: Veröffentlichung
• (who): Korea Development Institute (KDI)
• (where): Sejong
• (when): 2022

Further information

• DOI: doi:10.23895/kdijep.2022.44.1.1
• Handle: http://hdl.handle.net/10419/251901
• Last update: 10.03.2025, 11:44 AM CET