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Migration and Social Insurance1

Published online by Cambridge University Press:  17 August 2016

Helmuth Cremer
Affiliation:
Toulouse School of Economics(GREMAQ, IDEI and Institut universitaire de France)
Catarina Goulão
Affiliation:
Toulouse School of Economics(GREMAQ, INRA)
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Summary

Mobility across countries is often suspected to affect the coexistence of different social insurance systems. A wide variety of social protection systems exist within the EU. Some are of Beveridgean inspiration (with universal and more or less flat benefits), while others are mainly Bismarckian (with benefits related to past contributions). Concerns about the sustainability of the most generous and redistributive (Beveridgean) insurance systems are often based on the assumption of (near) perfect and costless mobility. In reality, labor mobility remains limited. Such low levels of migration rates could, mistakenly, lead to the conclusion that migration would currently not be affecting the redistributive social insurance systems. We address this issue in a two-country setting, where mobility is costly and where individuals differ in mobility cost (attachment to their native country). A Bismarckian insurance system is not affected by migration while a Beveridgean one is. Our results suggest that the race-to-the-bottom affecting tax rates may be more important under Beveridge-Beveridge competition than under Beveridge-Bismarck competition. Finally, we study the strategic choice of the type of social protection. We show that Bismarckian governments may find it beneficial to adopt a Beveridgean insurance system.

Résumé

Résumé

Les pays de l’UE ont différents systèmes de protection sociale. Dans certains, ils sont « beveridgiens », ne dépendent pas des revenus antérieurs des bénéficiaires et les prestations sociales sont modestes. Dans d’autres, ils sont « bismarckiens » et les allocations sont globalement plus élevées, mais d’un montant inégal, en fonction des cotisations passées de chacun (à l’image d’un système assurantiel). La mobilité (internationale) est souvent perçue comme un obstacle à la coexistence de systèmes d’assurance sociale qui redistribuent à des degrés différents. Même si, en réalité, la mobilité de la main-d’œuvre reste limitée, cela ne signifie pas qu’elle ne constitue pas un danger pour la protection sociale. Nous étudions cette question dans un modèle à deux pays, où la mobilité est coûteuse et où les individus diffèrent dans leurs coûts de mobilité (liés à l’attachement à leur pays d’origine). Nous montrons que, contrairement à un système beveridgien, un système bismarckien n’est pas affecté par la migration. Nos résultats suggèrent aussi que la baisse du niveau de protection qu’entraîne la mobilité est plus forte dans un monde à deux pays beveridgiens que dans celui d’un pays beveridgien et d’un autre bismarckien. Enfin, nous étudions le choix stratégique du type de protection sociale et montrons que les gouvernements bismarckiens peuvent avoir un intérêt à adopter un système beveridgien.

Type
Research Article
Copyright
Copyright © Université catholique de Louvain, Institut de recherches économiques et sociales 2015 

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Footnotes

1

We thank Michel Lebreton, Efraim Sadka, and the participants in the Public Economics and Political Economy Workshop (Toulouse School of Economics) for their helpful suggestions and comments. Financial support from the Chaire « Marché des risques et création de valeur » of the FdR/SCOR is gratefully acknowledged.

2

Toulouse School of Economics. 21, Allée de Brienne, 31015 Toulouse Cedex 6, FRANCE, tel: +33 (0)5 61 12 86 06. [email protected]

3

Corresponding author: Toulouse School of Economics. 21, Allée de Brienne. 31015 Toulouse Cedex 6, FRANCE, tel: +33 (0)5 61 12 86 82. [email protected]

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