Abstract

This paper implements a set of generational accounts to estimate the impact of immigration on the sustainability of the Italian welfare state. Italians' net tax-age profiles are reconstructed on the basis of surveys; most of the immigrants' net tax-age profiles are reconstructed indirectly. According to our estimates immigration can only partly relieve the burden that current fiscal policy will put on future generations. In the baseline case immigrants' total net taxes reduce the intergenerational imbalance by 6 percentage points out of 15. Interestingly, immigration appears to be more effective in this regard if the immigrants stay in Italy until they die. However, immigration alone cannot restore long-term solvency. Fundamental reform is needed.