Overlapping Generations Models with Immigration

In this work we develop overlapping generations models (OLG) which explicitly include immigration. In the following, we propose two general equilibrium models. In a first approach, we investigate the effect of a sudden variation in the number of immigrants on the host country to shed light on the welfare effects of immigration for the various generations of the host country’s population. Subsequently, in a second model, we vary the age structure of the inflowing migrants and determine the impact of immigration on the pension system and capital accumulation. The impact of age-specific immigration on the social security rate and the pension expenditure rate in a benefit-defined pay-as-you-go pension scheme are presented. Moreover, scaled pension expenditures and tax payments for the two groups, natives and immigrants, are given. For the presented numerical experiment the social security rate decreases with the age of the arriving immigrants although the old-age dependency ratio increases substantially. This is because of the fact that immigrants qualify for fewer pensions in the host country. Moreover, across all age groups immigrants are net payers of the pension system. Hence, they are at least to a small extend able to close the financial gap caused by the aging of the native population.