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Immigration, integration and fiscal sustainability

Abstract

Economic theory points out that immigration of even low-skilled immigrants may improve public finances in Western welfare states, and it is sometimes suggested that fiscal sustainability problems in Western countries caused by ageing populations could be solved by increasing immigration. We examine consequences of various immigration scenarios using the large-scale computable general equilibrium model Danish rational economic agents model describing the Danish economy. It turns out that increased immigration will generally worsen the Danish fiscal sustainability problem. Improved economic integration of immigrants and their descendants, however, may alleviate the problems of the public sector considerably.

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Acknowledgements

I wish to thank two anonymous referees for valuable comments and Martin Eggert, Cathrine Marie Gruno and Morten Lobedanz Sørensen for skilful research assistance.

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Correspondence to Poul Schou.

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Responsible editor: Klaus F. Zimmermann

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Schou, P. Immigration, integration and fiscal sustainability. J Popul Econ 19, 671–689 (2006). https://doi.org/10.1007/s00148-005-0027-x

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  • DOI: https://doi.org/10.1007/s00148-005-0027-x

Keywords

  • Immigration
  • Sustainable fiscal policy
  • CGE models

JEL

  • F22
  • E62
  • D58