In low-fertility societies with regular immigration inflows of young workers, reducing immigration disproportionately raises dependency ratios as native populations shrink. This creates a convex policy frontier: restricting migration raises fiscal costs at an increasing rate. We quantify this mechanism using a population model combined with novel estimates of immigrants’ fiscal contributions in Euro area countries. Eliminating immigration raises the fiscal burden of aging by 16%, while doubling inflows reduces it by only 9%. The convexity generates large cross-country differences in fiscal gains from immigration, complicating common European policy design. Increasing fertility does not provide comparable relief.
The Costs of Building Walls: Immigration and the Fiscal Burden of Aging in Europe
Apresentação 108.º Seminário GEE/GPEARI - The Costs of Building Walls: Immigration and the Fiscal Burden of Aging in Europe.pdf
