Public Pensions and Voting on Immigration

In a recent paper, Scholten and Thum (1996) analyze. the impact of a pay-as-you-go (PAYG) pension system with a fixed replacement ratio on the immigration policy in a democracy. We extend the analysis of median voter's choice in two respects. First, in contrast to Scholten and Thum (1996) who assume myopic voting behavior, our paper considers fully rational agents and provides a solution under this more complex behavioral assumption. Voting with rational agents yields a more liberal immigration policy than with myopic voters. Second, we examine a different decision structure with a fixed contribution rate to the pension system. In this case the majority rule leads to a completely different solution.