Immigration policy and demographic dynamics: Welfare analysis of an aging Japan

Abstract

This study quantified the effects of immigration policies in an aging and depopulating Japan. Under a constant total number of immigrants, it focused on the optimal period for an immigration policy that maximized per-capita utility. Simulation results, based on an extended lifecycle simulation model with endogenous fertility, showed that a longer period immigration policy increased the future population and enhanced long-run economic growth. Conversely, a shorter period immigration policy enhanced economic growth in earlier years but less so in the long run. This study found that an optimal duration for an immigration policy, under the standard parameter settings for Japan, was nine years; this finding was derived through reconciling the merits and demerits between shorter and longer period immigration policies.