Ageing, migration and endogenous public pensions

This paper analyses migration behaviour of mobile workers in reaction to population ageing. We show that the conventional wisdom that a decrease in fertility will lead to a rise in wages, and thus to an inflow of immigrants that mitigates the adverse effects of ageing on public pensions, may not hold if labour is heterogeneous. Moreover, we demonstrate that if public pensions are endogenous, i.e., if ageing leads the elderly to successfully lobby for higher taxes, it may take several generations before a steady-state is reached and the initial migration flow may be opposite to the steady-state migration.