Will Eastern European Migrants Happily Enter the German Pension System after the EU Eastern Enlargement?

A major concern in Western Europe and especially in Germany is that with the EU eastern enlargement inflows of workers occur, which will be net beneficiaries of the domestic social security systems. We introduce a model and present evidence by comparing pension systems in the main source and target countries (Poland, Hungary, Czech Republic; Germany) that show that immigrants most likely have to face a burden from entering the German pension system. Only if the total number of immigrants is sufficiently large the burden may change into a gain. We conclude that if migration takes place, it will do so despite – not because of – the existence of the pension systems. (JEL-Classification: H55, H73, F15, F22). ∗ Corresponding author: Tim Krieger, Seminar für Wirtschaftspolitik, Ludwig-MaximiliansUniversität München, Akademiestr. 1/II, 80799 München, Germany, ph. +49-89-21802249, fax +49-89-21806296, [email protected]. Earlier versions of this paper were presented at the “Institutions in Transition” conference in Ljubljana and at the “Policy Competition and the Welfare State” conference in The Hague. The authors would like to thank James Dunlevy, Ulrich Hange, Dušan Kidrič, Margit Schratzenstaller and Bernhard Seidel for very helpful comments and discussions.