Migration and the welfare state: Dynamic Political-Economy Theory

Assaf Razin, Efraim Sadka, Benjarong Suwankiri

NBER Working Paper No. 14784
Issued in March 2009, Revised in December 2011
NBER Program(s):International Finance and Macroeconomics

We develop a dynamic politico-economic theory of welfare state, featuring three groups of voters: skilled workers, unskilled workers, and old retirees. The welfare-state is modeled by a proportional tax on labor income to finance a demogrant in a balanced-budget manner to capture the essence of inter-and intra-generational redistribution of a typical welfare system. Migrants arrive when young and their birth rate exceeds the native-born birth rate. We characterize political-economic equilibrium policy rules consisting of the tax rate, the skill composition of migrants, and the total number of migrants, in terms of demographic and labor productivity characteristics. We find that political coalitions will form among skilled and unskilled voters or among unskilled and old voters in order to block the other group from coming into power. As a consequence, the ideal polices of the unskilled voters always feature in any political economy equilibrium.

download in pdf format
   (399 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w14784

Published: MIGRATION AND THE WELFARE ST ATE: POLITICAL-ECONOMY , FORMATION POLICY MIT Press, October 2011. Book Review: Sharun W Mukand, Journal of Economic Literature 2012, 50 ( 3 ) , 791–794, American Economic Association

Users who downloaded this paper also downloaded* these:
Razin, Sadka, and Suwankiri w15597 Migration and the Welfare State: A Dynamic Political-Economy Theory
Cohen and Razin w14459 The Skill Composition of Immigrants and the Generosity of the Welfare State: Free vs. Policy-Controlled Migration
Akee, Simeonova, Costello, and Copeland w21562 How Does Household Income Affect Child Personality Traits and Behaviors?
Huang and Chaloupka w18026 The Impact of the 2009 Federal Tobacco Excise Tax Increase on Youth Tobacco Use
Cohen, Razin, and Sadka w14738 The Skill Composition of Migration and the Generosity of the Welfare State
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us