Modelling Migration in an OLG Framework: the Case of UK Migration Policy

This paper uses an OLG CGE model for the UK to illustrate the long-term effect on migration on the macroeconomy. As an illustration we use current UK government's migration target to reduce net migration "from hundreds of thousands to tens of thousands". Achieving this target would require to reduce recent net migration numbers by a factor of 2. In our simulations we compare the impact of demographic shock based on the principal ONS population projections with the lower migration scenario, which assumes that migration rates are reduced by 50%. Our results show that such a significant reduction in net migration has strong negative effect on the economy. Both level of GDP and GDP per capita fall during the simulation period. Moreover this policy has significant negative impact on public finances. As a result of growing gap between government revenues and spending, public debt increases by 8 percentage points of GDP in case or lower migration. See above See above