Global Aging and Fiscal Policy with International Labor Mobility: A Political Economy Perspective
IMF Working Papers, July 1, 2005
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- Global Aging and Fiscal Policy with International Labor Mobility: A Political Economy Perspective
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Bibliographic details
- Authors: Mehmet S Tosun
- Published: July 1, 2005
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451861594.001
Overview and Research Design
- Author: Mehmet S Tosun
- Publication date: July 1, 2005
- This paper uses an overlapping generations model with international labor mobility and a politically responsive fiscal policy to examine aging in developed and developing regions.
- The model incorporates migrant workers as laborers, savers, and voters and considers political structures composed of young and elderly voters in both labor-receiving and labor-sending countries.
- Numerical simulations are used to evaluate outcomes under different mobility and political participation specifications.
Key Findings from Numerical Simulations
- The developed region benefits more from international labor mobility through the contribution of migrant workers as laborers, savers, and voters.
- The developing region experiences significant growth in all specifications but benefits more under international capital mobility.
- Restricting political participation of migrant workers in the developed region produces inferior growth results.
Policy-Relevant Implications
- International labor mobility can alter the political structure (composition of young and elderly voters) in both origin and destination countries, with material effects on fiscal policy and growth.
- Allowing migrant workers to participate politically in labor-receiving countries appears to improve growth outcomes relative to scenarios where their political participation is restricted.
- The relative gains from labor mobility versus capital mobility differ by region: developed regions derive larger benefits from labor mobility while developing regions derive larger benefits from international capital mobility.