Journal Archive

Home > Journal Archive
Cover Image
  • P-ISSN 2586-2995
  • E-ISSN 2586-4130
Cite

KDI Journal of Economic Policy. Vol. 44, No. 1, February 2022, pp. 1-47

https://doi.org/10.23895/kdijep.2022.44.1.1

× KDI Open Access is a program of fully open access journals to facilitate the widest possible dissemination of high-quality research. All research articles published in KDI JEP are immediately, permanently and freely available online for everyone to read, download and share in terms of the Creative Commons Attribution 4.0 International License.

Political Economy of Immigration and Fiscal Sustainability

JINWOOK HUR

Author & Article History

Manuscript received 28 November 2021; revision received 01 December 2021; accepted 29 December 2021.

Abstract

This paper introduces a politico-economic model with a welfare state and immigration. In this model, policies on taxes and immigration are determined through a plurality voting system. While many studies of fiscal implications of immigration argue that relaxing immigration policies can substitute for tax reforms in an aging economy, I show that the democratic voting procedure can dampen the effect of relaxing immigration policies as desired policy reforms are not always implemented by the winner of an election. This political economy results in three types of social welfare losses. First, the skill composition is not balanced at a socially efficient level because workers are motivated to maximize their wages. Second, older retirees implement excessive taxes to maximize the size of the welfare state. Third, the volume of immigration is lower than the optimal level given the incentive by young workers to regain political power in the future.

Keywords

Immigration, Political Economy, Fiscal Sustainability

JEL Code

E60, F22, H20, J61, D72

상단으로 이동

KDIJEP