PAYG challenge for preferential migration

Abstract

<jats:title>Abstract</jats:title> <jats:p>The current study assesses the role of the pay-as-you-go system as an intergenerational redistributive mechanism while immigration control is considered. A theoretical model of a small open economy populated with overlapping generations of heterogeneous agents is used to show that skill-favouring immigration policies are, under rather permissive conditions, welfare depriving for the overall population. However, the policy-setting generation is shown to benefit from immigration control, thus decreasing the welfare for the future population.</jats:p>