Gurgen Aslanyan

Research

Migration Challenge for PAYG

Immigration has been popularised in the economics literature as a tool that could be used to balance troubled PAYG pension systems. Pivotal research by Razin and Sadka shows that unskilled immigration can overcome the pension problem and, further, boost the general welfare in the host economy. However, a large strand of current economics research is engaged in identifying mechanisms through which unskilled immigration, while solving the pension problem, is causing undesired shifts in general welfare. This work shows that recurring unskilled immigration will not only reduce the general welfare, but may be challenging the very pension system by reducing the pension benefits themselves. Further, interpreting the actual data, it is suggested that immigration policies are designed either based on public finances only or in a political environment of gerontocracy.

Immigration Control and Long-Run Population Welfare
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The current study assesses the effects of immigration control on the welfare of the current and future population of a host economy. A theoretical model of a small open economy populated with overlapping generations of heterogeneous agents is used to show that skill-favouring immigration policies are, under rather permissive conditions, welfare depriving for the overall population. However, the policy-setting generation is shown to benefit from immigration control, thus decreasing the welfare for the future population. (Submitted)

Can Social Security Survive Non-Selective Migration?

The study combines immigration control with willingness to reform the social security systems. A small open economy is modelled populated with overlapping generations of heterogeneous agents that participate in an earnings-related unfunded pay-as-you-go social security system (where migrants are net contributors to the system). The results show that, in case controlling for the skill level of the immigrants is not possible, the native population may prefer to privatise the existing unfunded pension system. Further, once there is a possibility of a joint policy reform (i.e. immigration and social security at once) the native population may still prefer to allow only low skilled and initiate the termination of PAYG system in favour of fully funded.
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Immigration and Social Security: Policies and Reforms

Recent demographic developments have been challenging the national budgets in most of the developed economies: Ageing, increased longevity and decreased fertility, shrinks the tax base while increasing the number of beneficiaries of the existing social security systems. Thus the governments of those countries are facing policy sustainability problems. The problem is more severe in social economies, such as Germany, where the social spending is large and the welfare enhancing policies are prioritized. Economic literature offers several possible solutions to the problem. This work concentrates on immigration policies (inclusive and exclusive, selective and free) and hypothetical social security reforms in an open economy model with overlapping generations of heterogeneous agents. Increased immigration policy is under concern. It is shown that the increased immigration is welfare improving and that the selective immigration policy brings further welfare benefits. The paper suggests also that exclusive immigration policy bring welfare gains to the native population.
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Melting Pot vs. Cultural Mosaic: Dynamic Public Finance Perspective

The traditional immigrant countries can be characterised as either supporting a melting pot or cultural mosaic system: While melting-pot system idealises full assimilation of immigrants, the cultural-mosaic system favours multiculturalism. The current study shows that full-assimilation, i.e. the melting-pot system, is inferior to cultural-mosaic system if looked through the lenses of public finance (chiefly, unfunded social security) and hence the population welfare. At the same time, the economic comparison of no-assimilation and partial-assimilation systems depends on the existence of immigrant skill control in the economy.
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Pension Pillars and Immigration

A strand of literature is devoted to the discussion of possible usage of immigration as mitigation for public pension problem in ageing economies. It is widely believed that immigration has positive effect on the public finances, in particular, the pay-as-you-go (PAYG) defined benefit social security schemes. This paper, however, shows that the total welfare of the population, both native and immigrant, is increased further if the migrants are kept out of the state managed first pillar PAYG scheme: PAYG system is ineffective and generates some welfare loss for participating population. Not introducing the immigrants to PAYG brings welfare increase. However the increase is not symmetric and a redistributive mechanism needs to be implemented. Computational experiments conducted on German data confirm the theoretical prediction.
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Economic Effects of Illegal Migration and its Alternatives

Current debates on US immigration policy suggest fighting against large scale illegal immigration and instead introducing temporary migration as an alternative. This work aims to study the effect of this and some alternative immigration policies on the economy and welfare of the agents.