International labor migration and social security: Analysis of the transition path

Abstract

This paper numerically simulates a two-country overlapping-generations model to study international labor migration when the two countries are characterized by different social-security systems. The present analysis extends previous work beyond steady-state considerations. The most striking result is that in all cases considered, dynamically efficient and inefficient economies in autarkic steady-state, migration leads to temporary welfare losses in both countries. In all cases, the transition path is characterized by temporary dynamic inefficiency in one country. Copyright Springer-Verlag 2004