Immigration and PAYG pension systems in the presence of increasing life expectancy

According to Lacomba and Lagos (2010), considering the effect of immigration on pension benefits of native individuals, despite immigrants having low average productivity, an open borders policy would be always implemented since most of current domestic cohorts gain from immigration. In this paper we change the demographic assumptions at the bases of the model of Lacomba and Lagos (2010), assuming increasing life expectancy over time. As a consequence, we find that, in the presence of pay-as-you-go pension systems, there are cases in which an open borders policy would not be implemented and that retirement age and immigrants’ skill play an important role in determining the effect of immigration on the welfare of native population.