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Migration and Social Replacement Incomes: How to Protect Low-Income Workers in the Industrialized Countries Against the Forces of Globalization and Market Integration

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Abstract

This paper discusses how an industrialized country could defend the living standard of its unskilled workers against the wage competition from immigrants. It shows that fixing social replacement incomes implies migration into unemployment. Defending wages with replacement incomes brings about first order efficiency losses that approximate the budget cost of the government. By contrast, wage subsidies involve much smaller welfare losses. While the exclusion of migrants from a national wage replacement program does not avoid the distortions in labor migration, the (temporary) exclusion of migrants from a national wage subsidy program makes it possible to reach the first best migration pattern despite the preservation of the welfare state.

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Authors and Affiliations

  1. Ifo Institute for Economic Research, University of Munich, 81679, Munich, Germany

    Hans-Werner Sinn

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  1. Hans-Werner Sinn
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Correspondence to Hans-Werner Sinn.

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JEL Code: F15, F22, I38, H5, J61

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Sinn, HW. Migration and Social Replacement Incomes: How to Protect Low-Income Workers in the Industrialized Countries Against the Forces of Globalization and Market Integration. Int Tax Public Finan 12, 375–393 (2005). https://doi.org/10.1007/s10797-005-1618-x

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  • DOI: https://doi.org/10.1007/s10797-005-1618-x

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