Working Paper

Economia Política

Helmuth Cremer, Catarina Goulão

2010/53: Migration and social insurance

In Europe there are countries whose welfare system is more in the tradition of Beveridge (based on universal flat benefits) and others whose system is mainly Bismarkian (based on benefits related to past contributions).Labor mobility across different countries raises concerns about the sustainability of the most generous and redistributive insurance systems. We address the sustainability of more redistributive insurance systems in a context of labor mobility. In a two/countries seting We find out that a Bismarkian insurance policy is never affected by migration but that the Beveridgean one is. Moreover, our results suggest that the race-to-the-bottom affecting tax rates may be more important under Beveridge-Beveridge competition than under Beveridge-Bismarck competition .Additionally, Bismarkian governments may find it beneficially to adopt a Beveridgean policy.