TY  - JOUR
AU  - Sand,Edith
AU  - Razin,Assaf
TI  - Immigration and the Survival of Social Security: A Political Economy Model
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 12800
PY  - 2006
Y2  - December 2006
UR  - http://www.nber.org/papers/w12800
L1  - http://www.nber.org/papers/w12800.pdf
N1  - Author contact info:
Edith Sand
Eitan Berglas School of Economics
Tel Aviv University
Tel Aviv 69978,
ISRAEL
E-Mail: edith.sand@boi.org.il

Assaf Razin
Department of Economics
Cornell University
Uris 422
Ithaca, NY 14853
Tel: 607/255-9625
Fax: 607/255-2818
E-Mail: ar256@cornell.edu
AB  - In the political debate people express the idea that immigrants are good because they can help pay for the old. The paper explores this idea in a dynamic political-economy setup. For this purpose we develop an OLG political economy model of social security and migration. We characterize sub-game perfect Markov equilibria where immigration policy and pay-as-you-go (PAYG) social security system are jointly determined through a majority voting process. The main feature of the model is that immigrants are desirable for the sustainability of the social security system because the political system is able to manipulate the ratio of old to young and thereby the coalition which supports future high social security benefits. We demonstrate that the older is the native born population the more likely is that the immigration policy is liberalized and the social security system survives.
ER  -