Migration Challenge for PAYG

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. Immigration has been popularised in the economics literature as a tool to balance the troubled PAYG pension systems. A pivotal research by Razin and Sadka showed that unskilled immigration can surmount the pension problem and, further, boost the general welfare in the host economy. However a large strand of current economics literature is engaged in identifying mechanisms through which unskilled immigration, while solving the pension problem, causes undesired shifts in general welfare. This work shows that actually recurring unskilled immigration may challenge the entire pension system and decrease the pension benefits themselves. Abstract Immigration has been popularised in the economics literature as a tool to balance the troubled PAYG pension systems. A pivotal research by Razin and Sadka showed that unskilled immigration can surmount the pension problem and, further, boost the general welfare in the host economy. However a large strand of current economics literature is engaged in identifying mechanisms through which unskilled immigration, while solving the pension problem, causes undesired shifts in general welfare. This work shows that actually recurring unskilled immigration may challenge the entire pension system and decrease the pension bene…ts themselves. Terms of use: Documents in JEL

Migration and the Demographic Shift

“…12 Aslanyan (2014) challenges the idea that unskilled immigration may sustain the pension system at all and shows that unskilled immigration not only reduces general welfare but may even decrease pension benefits.…”

“…In Kemnitz's (2008) model, immigration benefits the retirees and improves the pension system only if total employment declines due to the fact that with inelastic labor demand any increase in employment reduces the wages used to finance pensions. See also a review of related studies in Aslanyan (2014).…”

Financial literacy and voluntary savings for retirement: novel causal evidence

“…Increasing longevity along with decreasing fertility will likely challenge the sustainability of unfunded pay-as-you-go (PAYG) pension systems in the majority of developed economies (e.g. Aslanyan, 2014). Due to the reduced benefits of state pensions, wealth accumulation for retirement in private pension schemes is of increasing importance.…”

PAYG challenge for preferential migration

“…The effect of different immigration policies on the current and future population is studied, as immigration potentially may cause many unwanted changes in the economy, including intra- as well as inter-generational redistribution of welfare (Auerbach and Lee, 2011). While there is a vast literature on the impact of immigrants on the host economy (Borjas, 1999; Krieger, 2014; and Aslanyan, 2014 provide an excellent survey), the great majority of that work is concentrated on the short-term effects of those policies, mostly ignoring the welfare of the future population.…”

“… 6 This specification follows Bismarckian social security system that allows intergenerational redistribution and excludes intragenerational redistribution. Following Aslanyan (2014) and Sekiguchi and Jinno (2015) we could add Beveridgian system and combine the two with a Bismarckian factor to mimic the reality closer (though size of the Beveridgian component in PAYG is usually very small in most of the world). At the same time, it needs to be noted that the intragenerational redistributive character of the Beveridgian system will somewhat change the results of this study, making everything dependent on the Bismarckian factor and thus more complicated and difficult for interpretation.…”