The long-term macroeconomic effects of lower migration to the UK

This paper looks at the possible scenarios of migration policy should the UK leave the EU. The paper uses an OLG model which brings together labour market, fiscal and other macroeconomic effects in one framework. It also adds a dynamic perspective, differentiates between natives and different categories of immigrants and captures age and qualification compositional effects.

The paper compares the two migration scenarios: Leave and Remain. By 2065, in the Leave scenario, aggregate GDP and GDP per person are 9% and 1% respectively lower compared to Remain scenario. Reduced migration after leaving the EU has a negative impact on the public finances, because of higher dependency ratio. This requires an increase in taxation of about £400 per person (2014 pounds) in 2065. The results are sensitive to the assumptions that change productivity of the labour force and dependency ratio.

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