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Immigration, Inequality and the Welfare State: A Modern Macroeconomic Approach (IMWEL)

A six year project that aims to develop a new framework of analysis that accounts for the multifactorial nature of immigrant and native workers, the very different labor market dynamics observed across countries and the very different public policies observed across countries. 

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About the project

Immigration has become one of the great transformative political issues of our time. The 2015 immigration wave, following war in the Middle East, was a large shock for European economies and has caused much debate among social scientists, policy makers and in the popular press. With many corners of the world continuing to be poor and unstable, new immigration waves are likely to come and immigration is likely to stay high on the political agenda.

The goal of this project is to investigate the economic mechanisms through which immigration impacts the host economy and the institutions through which the host economy impacts the experience of migrants. More broadly it will investigate the interplay between welfare state policies, labor market frictions, labor market outcomes (unemployment, labor force participation, inequality), social welfare and immigration.

In the first part of the project we quantify how differences in labor market institutions and public policy across OECD economies affect the labor market impact of a large immigration shock. In the second part we study how differences in labor market institutions and public policy across OECD economies affect the fiscal sustainability of the welfare state during a large immigration shock and how this depends on the socioeconomic composition of the migrants. Part three characterizes the optimal design of migrant allocation rules to European countries and optimal public policy responses for individual countries. In part four we quantify the impact of immigration and automation technologies on income and wealth inequality in the United States since 1980. Finally part five uses Norwegian micro data to obtain new insights about the distributions of income and consumption risk, which is important role for inequality and welfare.

Objectives

The primary objective is that this project will advance the knowledge of the interplay between immigration, welfare state policies, the labor market and inequality, using a modern macroeconomic approach.

The secondary objectives are:

- Quantify how differences in labor market institutions and public policy across OECD economies affect the labor market impact of a large immigration shock.

- Quantify how differences in labor market institutions and public policy across OECD economies affect the fiscal sustainability of the welfare state during a large immigration shock and how this depends on the socioeconomic composition of the migrants.

- Characterize the optimal design of migrant allocation rules to European countries and optimal public policy responses for individual countries.

- Quantify the impact of immigration and automation technologies on income and wealth inequality in the United States since 1980.

- Gain new insights about the distributions of income and consumption risk.

Financing

The project is funded by the Research Council of Norway under the VAM program with NOK 12 million over a six year period from 2020 to 2026.

Publications

  • Elin Halvorsen; Hans Holter; Serdar Ozkan & Kjetil Storesletten (2020). Dissecting Idiosyncratic Earnings Risk. Centre for Economic Policy Research. Discussion papers.  ISSN 0265-8003. Link to paper. 
Published Apr. 9, 2021 9:44 AM - Last modified June 1, 2021 2:51 PM