Immigration, fertility and human capital A model of economic.pdf

Immigration, fertility and human capital: A model of economic decline of the West** Leonid V. Azarnert Department of Economics, Bar Ilan University, Ramat Gan, 52900, Israel; CESifo, Munich, Germany Abstract I show how the influences of unskilled immigration, differential fertility between immigrants and the local indigenous population, and incentives for investment in human capital combine to predict the decline of the West. In particular, indigenous low-skilled workers lose from unskilled immigration even if the indigenous low- skilled workers do not finance redistribution, do not compete with immigrants in the labor market, and do not compete with immigrants for publicly financed income transfers. For the economy at large, high-fertility unskilled immigrants and a low- fertility indigenous population result in economic decline through reduced human capital accumulation and reduced growth of per-capita output. Keywords: immigration, redistribution, ethnic diversity, fertility, human capital, economic growth JEL classification: D3, F22, J1, O4 ** Comments of anonymous referees are gratefully acknowledged. I also thank for comments on previous versions of this paper participants in seminars and the 2008 annual conference of the Scottish Economic Society, the 1st workshop on Dynamics, Optimal Growth and Population Change (Milan 2008) and the workshop on Inequality and Poverty in the Global Economy (Mannheim 2009).  Tel.: +972-3-5317534; Fax: +972-3-7384034 E-mail address: azarnel@mail.biu.ac.il 1 1. Introduction In Europ