Immigrants as a solution to the demographic deficit

I just read this paper from Norway, which presents some pretty dramatic findings regarding a cohort of immigrants to that country in the 1970s.

I think the basic lesson is that institutions matter a lot for the effects of immigration. They do so in two senses. First, and this is not emphasized much in this paper, the rules for who you let in matter a lot in terms of source countries, in terms of language and skill requirements, in terms of age and in terms of employment focus versus a focus on family reunification and/or political asylum. Different countries approach this very differently, even otherwise fairly similar countries such as the US and Canada. On this policy dimension, I think Canada has done a vastly better job than the US with its point system that focuses on employment. The policy debate in Canada is very honest, in a way that the US policy debate is not, about the fact that the immigrants are expected to help support Canada's pay-as-you-go government pension system.

Second, and this is what is highlighted in this paper, welfare state institutions matter a lot as well. Replacement rates over 100 percent combined with a loose review system can result in a lot of people implicitly retiring into disability benefit receipt. What is not so clear from this version of the paper is the extent to which the differences in terms of spousal labor supply and number of chlidren between migrants and natives are induced by the welfare system interacting with the poorer labor market opportunities of the migrants or whether they represent cultural patterns brought over from the source country.