Effects of Legal and Unauthorized Immigration on the U.S. Social Security System

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractImmigration is having an increasingly important effect on the social insurance system in the United States. On the one hand, eligible legal immigrants have the right to eventually receive pension benefits but also rely on other aspects of the social insurance system such as health care, disability, unemployment insurance, and welfare programs, while most of their savings have direct positive effects on the domestic economy. On the other hand, most undocumented immigrants contribute to the system through taxed wages but are not eligible for these programs unless they attain legal status, and a large proportion of their savings translates into remittances that have no direct effects on the domestic economy. Moreover, a significant percentage of immigrants migrate back to their countries of origin after a relatively short period of time, and their savings while in the United States are predominantly in the form of remittances. Therefore, any analysis that tries to understand the impact of immigrant workers on the overall system has to take into account the decisions and events these individuals face throughout their lives, as well as the use of the government programs they are entitled to. We propose a life-cycle Overlapping Generations (OLG) model in a general equilibrium framework of legal and undocumented immigrants' decisions regarding consumption, savings, labor supply, and program participation to analyze their role in the financial sustainability of the system. Our analysis of the effects of potential policy changes, such as giving some undocumented immigrants legal status, shows increases in capital stock, output, consumption, labor productivity, and overall welfare. The effects are relatively small in percentage terms but considerable given the size of our economy.

Dealing With Undocumented Immigrants: The Welfare Effects of Amnesties and Deportations

“….). Disregarding remittances allow for a higher tractability in the two-period model in contrast to the multi-period model developed by Benítez-Silva et al (2011). Adding remittances and assuming that they decrease for legalized individuals would reinforce the capital accumulation channel in my simulations as a higher amount of savings would remain in the country.…”

“…An amnesty therefore has an additional positive effect in the presence of imperfect capital market access. This channel is reinforced in Benítez-Silva et al (2011), who assume that the savings behavior of regularized immigrants changes substantially (i.e. increased savings and reduced remittances) and reinforces capital accumulation.…”

“…Including remittances would demand to take into account trade imbalances between countries in order to compensate outgoing capital flows [see di Giovanni et al (2015)]. Benítez-Silva et al (2011) stipulate that legalized individuals’ savings behavior changes (i.e. they remit less).…”

“…The study closest to this one is Benítez-Silva et al (2011) who develop a multi-period overlapping generations (henceforth OLG) model in order to assess the impact of an immigration amnesty in the United States. The authors assume that differences in productivity and in savings behavior between legal and undocumented immigrants are key.…”

“…propensity, reason to remit and preference intensity, etc...). Disregarding remittances allow for a higher tractability in the two-period model in contrast to the multi-period model developed by Benítez-Silva et al (2011).…”