TY  - JOUR
AU  - Razin,Assaf
AU  - Sadka,Efraim
AU  - Suwankiri,Benjarong
TI  - Migration and the Welfare State: A Dynamic Political-Economy Theory
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 15597
PY  - 2009
Y2  - December 2009
UR  - http://www.nber.org/papers/w15597
L1  - http://www.nber.org/papers/w15597.pdf
N1  - Author contact info:
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

Efraim Sadka
Tel Aviv University
Eitan Berglas School of Economics
P.O.B. 39040
Ramat Aviv, Tel Aviv, 69978, ISRAEL
E-Mail: sadka@post.tau.ac.il

Benjarong Suwankiri
Department of Economics
Cornell University
Ithaca, NY
14853
E-Mail: bs246@cornell.edu
AB  - We develop a dynamic politico-economic theory of welfare state and immigration policies, 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 policies of the unskilled voters are featured more often in the political economy equilibria than any other groups regardless of the size of unskilled voters.
ER  -