Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/251901 
Authors: 
Year of Publication: 
2022
Citation: 
[Journal:] KDI Journal of Economic Policy [ISSN:] 2586-4130 [Volume:] 44 [Issue:] 1 [Publisher:] Korea Development Institute (KDI) [Place:] Sejong [Year:] 2022 [Pages:] 1-47
Publisher: 
Korea Development Institute (KDI), Sejong
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 welfar e state. Third, the volume of immigration is lower than the optimallevel given the incentive by young workers to regain political power in the future.
Subjects: 
Immigration
Political Economy
Fiscal Sustainability
JEL: 
E60
F22
H20
J61
D72
Persistent Identifier of the first edition: 
Creative Commons License: 
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Document Type: 
Article

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