Migration and Social Insurance

Abstract

In Europe there are countries whose welfare system is more in the tradition of Beveridge (based on universal flat benefits) and others whose system is mainly Bismarkian (based on benefits related to past contributions).Labor mobility across different countries raises concerns about the sustainability of the most generous and redistributive insurance systems. We address the sustainability of more redistributive insurance systems in a context of labor mobility. In a two/countries seting We find out that a Bismarkian insurance policy is never affected by migration but that the Beveridgean one is. Moreover, our results suggest that the race-to-the-bottom affecting tax rates may be more important under Beveridge-Beveridge competition than under Beveridge-Bismarck competition .Additionally, Bismarkian governments may find it beneficially to adopt a Beveridgean policy.JEL Codes: H23, H70

Competition for migrants in a federation: Tax or transfer competition?

“…The migration equilibrium 9 In existing studies of migration competition (adhering to tax or transfer competition), changes in the level of fiscal variables do not shift policy best responses. Instead, countries 'move along' the other countries' policy best responses when altering their own policy.…”

“…Cremer and Pestieau (1998) and Cremer and Goulão (2011) analyze competition in social insurance systems when benefits might be uniform (Beveridgean system) or related to income (Bismarckian system). They assume that taxes are strategically set and transfers adjust residually.…”

“…Interestingly, they look into the strategic choice of the type of social insurance (Beveridgean vs. Bismarckian). For instance, Cremer and Goulão (2011) show that when a government is only interested in insuring low-income households against income shocks, it may strategically choose to deviate from the straightforward choice of a Bismarckian system and may opt for a Beveridgean system. The papers differ from this analysis in terms of the dimension of migration competition that is endogenously chosen by jurisdictions.…”

“…9 The paper is organized as follows: Section 2 introduces the basic model, followed by a characterization of government behavior, for a given type of migration competition, in Section 3. Section 4 analyzes the endogenous emergence of tax or transfer competition, and Section 5 discusses extensions of the basic model.…”

Competition for Migrants in a Federation: Tax or Transfer Competition?

“…In our setting, a country strategically manipulates the other countries' policy best responses when choosing how to compete for migrants. 9 The paper is organized as follows: Section 2 introduces the basic model, followed by a characterization of government behavior, for a given type of migration competition, in Section 3. Section 4 analyzes the endogenous emergence of tax or transfer competition, and Section 5 discusses extensions of the basic model.…”