Immigration and the Welfare State

Transcription

1 Immigration and the Welfare State Victoria Chorny Rob Euwals Kees Folmer A Scenario Approach

2 Immigration policy

3 Research questions & methods Impact of immigration policy & welfare state on immigrant selection Impact immigration on labour market & welfare state Interaction immigration policy and welfare state policy Scenario approach (CGE model) Simulate immigration shocks in different welfare states

4 Results preview Temporary low-skilled immigrants have a significantly positive impact Permanent low-skilled immigrants have a negative impact even in the least generous state Permanent medium- and high-skilled immigrants have a slightly positive impact

5 Overview Literature review Immigrant selection Immigration impact Labour market Public finances Analytical framework: a scenario approach Welfare state design Immigration policy design Immigration scenarios Simulation results Conclusions

6 Literature review Immigration policy Criteria & requirements Incentives S-T: negative impact on substitutes L-T: production factors mobility Immigrant selection (age, socio-economic background) Labour market Immigration Welfare state Welfare magnet hypothesis (Borjas,1999) Age, socio-economic background Welfare state generosity Public finances

7 The MIMIC model MIMIC: Computable General Equilibrium (CGE) model for the Netherlands Long-run impact Imperfect labour market (right-to-manage) Search-matching per skill type 40 different household types

8 Analytical framework Welfare state design Three types of welfare states (de Mooij, 2006): RESIDUAL Individual responsibility UNIVERSAL Collective welfare provisions DIVERSIFIED Decentralized welfare provisions

9 Differences between the welfare states Differences between three types of welfare states RESIDUAL UNIVERSAL DIVERSIFIED percentage change w.r.t. base run Income tax Average rate 3½ 2 1¼ Marginal rate 7¾ 1¼ 3½ Labour market EPL indicator 1 -½ 0 Gross minimum wage Net replacement rate 9¼ 1 4½

10 Analytical framework Immigration policy design Immigration policy design based on two dimensions Human capital Duration of stay Three programmes for immigration policy TEMPORARY (low-skilled workers) OPEN (permanent low-skilled workers) SELECTIVE (permanent high-skilled workers)

11 Immigration policy design Temporary immigration TEMPORARY POLICY High-skilled SELECTIVE POLICY OPEN POLICY Permanent immigration Low-skilled

12 Immigration scenarios Change demographic variables from 2004 on: 1) Skill Low-skilled: primary or lower-secondary education High-skilled: upper-secondary or higher education 2) Duration of stay Permanent: immigrants arrive only once Same demographic structure as natives (family, retired) Temporary: new immigrants arrive every year Only singles (cannot take family) Limitation MIMIC does not distinguish immigrants from natives

13 Change of population composition Impact of a population increase of 1% due to different immigration programmes TEMPORARY OPEN SELECTIVE Population (total) 1,00 1,00 1,00 Children ,00 1,00 1,00 Students 0,00 1,00 1,00 Pensioners (65+) 0,00 1,00 1,00 Working age population (15-64) 1,79 1,00 1,00 Low-skilled 5,32 2,62 0,32 High-skilled 0,00 0,18 1,34 Working age population (15-64) 1,79 1,00 1,00 Singles without children 6,68 1,00 1,00 Singles with children 0,00 1,00 1,00 Families without children 0,00 1,00 1,00 Families with children 0,00 1,00 1,00 Elderly, age ,00 1,00 1,00

14 General impact of immigration The impact of immigration across the three welfare states Income taxes adjust c TEMPORARY OPEN SELECTIVE Labour supply (hours) Low-skilled High-skilled Real gross wage rate + Low-skilled + High-skilled + Unemployment rate (%) + + Low-skilled + + High-skilled + Income tax Marginal rate + Production per capita + + Public deficit adjusts c Public deficit (% of GDP) +

15 General impact of immigration Simulation results are in line with theory and empirical evidence TEMPORARY policy has the most positive impact on public finances and production per capita OPEN policy has a negative impact on public finances and production per capita in all states SELECTIVE policy has a slightly positive impact

16 Temporary low-skilled immigration General equilibrium effects of a TEMPORARY immigration policy Income taxes adjust Residual Universal Diversified Labour supply (hours) 2,336 2,282 2,302 Low-skilled 5,041 4,954 4,921 High-skilled 1,478 1,367 1,414 Real Gross wage rate 0,639 0,656 0,658 Low-skilled 1,473 1,514 1,580 High-skilled 0,179 0,164 0,159 Unemployment rate (%) 0,034 0,005 PM Low-skilled 0,015 0,028 PM High-skilled 0,066 0,053 PM Income tax Marginal rate 0,791 0,628 0,655 Production per capita 1,440 1,343 1,390 Public deficit adjusts Public deficit (% of GDP) 2,54 2,

17 Temporary low-skilled immigration RESIDUAL state benefits the most from TEMPORARY policy Most positive impact on labour market Net income improves as taxes fall significantly A large increase in production per capita DIVERSIFIED state benefits less UNIVERSAL state benefits the least Overall, very positive impact

18 Conclusions TEMPORARY policy in a centre of a debate Positive fiscal impact, boost to labour force High enforcement costs and inequality issues Risk: ending up in OPEN policy SELECTIVE policy is highly supported Positive impact Underestimated due to skill definition in MIMIC Same rights as natives Bring more immigrants with them