Immigration and growth in an ageing economy

This paper argues that immigration can help to alleviate the burden ageing presents for the welfare states of most Western Economies. We develop a macroeconomic framework which deals with the impact of both ageing and immigration on economic growth. This is combined with a detailed model of the labour market, to include the interaction with lowskilled unemployment. The empirical relevance of some crucial model assumptions is shown to hold for the Netherlands, 1973 – 2007. The conclusions are that immigration will help to alleviate the ageing problem, as long as the immigrants will be able to participate in the labour force at least as much as the native population. Moreover, the better educated the immigrants are or become, the higher their contribution to growth will be.