Sustaining fiscal policy through immigration

Using a calibrated general equilibrium overlapping generations model, which explicitly accounts for differences between immigrants and natives, this p aper investigates whether a reform of immigration policies alone could reso lve the fiscal problems associated with the aging of the baby boom generati on. Such policies are found to exist and are characterized by an increased inflow of working-age high- and medium-skilled immigrants, One particular f easible policy involves admitting 1.6 million 40-44-year-old high-skilled i mmigrants annually. These findings are illustrated by computing the discoun ted government gain of admitting additional immigrants, conditional on thei r age and skills.