Impacts of Immigration on Aging Welfare-State An Applied General Equilibrium Model for France

Immigration is often perceived as an instrument of adaptation for aging countries. In this paper, we evaluate, using a dynamic general equilibrium model, the contribution of migration policy in reducing the tax burden associated with the aging population in France. Four variants, compared to a baseline scenario based on official projections for France (INSEE, COR, etc.), are simulated with the aim to quantify the immigration effects on the French social protection finances. The first variant assesses the economic effects of immigration in France as projected into official forecasts. The three other variants are built on the same more ambitious annual quantitative flows of immigrants (corresponding to net inflows that have characterized the second great wave of immigration in France in the twentieth century). These three variants only distinguish in terms of the skill structure of new migrants. We show that the age and skill structure of immigrants is the key feature that mainly determines the effects on social protection finances. Overall, these effects are all the more positive in the short-medium term that the migration policy is selective (in favor of more skilled workers). In the long term, beneficial effects of a selective policy may disappear. But the financial gains from more consequent migration flows are relatively moderated in comparison of demographic changes it implies.