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The Long-Term Economic Impact of Reducing Migration in the UK

Published online by Cambridge University Press:  01 January 2020

Katerina Lisenkova ,
Marcel Mérette  and
Miguel Sánchez-Martínez
Katerina Lisenkova*
Affiliation:
National Institute of Economic and Social Research and Centre for Macroeconomics
Marcel Mérette*
Affiliation:
University of Ottowa
Miguel Sánchez-Martínez*
Affiliation:
National Institute of Economic and Social Research
*
E-mail: [email protected]
E-mail: [email protected]
E-mail: [email protected]
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Abstract

This paper uses an OLG-CGE model for the UK to illustrate the long-term effect of migration on the economy. We use the current Conservative Party migration target to reduce net migration “from hundreds of thousands to tens of thousands” as an illustration. Achieving this target would require reducing recent net migration numbers by a factor of about 2. We undertake a simulation exercise to compare a baseline scenario, which incorporates the principal 2010-based ONS population projections, with a lower migration scenario, which assumes that net migration is reduced by around 50 per cent. The results show that such a significant reduction in net migration has strong negative effects on the economy. By 2060 the levels of both GDP and GDP per person fall by 11.0 per cent and 2.7 per cent respectively. Moreover, this policy has a significant impact on public finances. To keep the government budget balanced, the effective labour income tax rate has to be increased by 2.2 percentage points in the lower migration scenario.

Keywords

UKmigrationOLGpopulation ageingC68E17H53J11J21
Type
Research Articles
Information
National Institute Economic Review , Volume 229 , August 2014 , pp. R22 - R30
Copyright
Copyright © 2014 National Institute of Economic and Social Research

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Footnotes

Financial support from the Economic and Social Research Council under the grant ‘A dynamic multiregional OLG-CGE model for the study of population ageing in the UK’ is gratefully acknowledged.

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