Abstract

We review the literature on recent demographic changes in Europe, focusing on two of the main challenges brought about by an ageing population: severe labour shortages in many sectors of the economy and growing pressures on both health and welfare systems. We discuss how and to what extent migration can contribute to addressing these challenges both in a short and a long-term perspective. Finally, we identify several areas in which more research is needed to help devise more effective policies to cope with a greying society.

Introduction

As European countries experience rapidly ageing populations, two major challenges have emerged for policy-makers. First, the decline in the size of the domestic labour force implies severe shortages in the availability of key skills needed in several sectors of the economy. Possible consequences are reduced productivity growth and decline in global competitiveness. Second, the increase in life expectancy will typically imply longer periods spent in retirement, generating pressures on the sustainability of existing pension systems, as well as new needs to provide care for a growing elderly population.

Immigration is often referred to as a possible response to address both of these challenges. Young foreign workers can fill some of the short-term skill shortages that have emerged and contribute in the medium and long run to reversing the trend towards population stagnation. At the same time, cultural differences and the common perception that foreigners might be a threat for the domestic population, in conjunction with the large migrations required to counter demographic developments in many European countries, suggest that migration can only be part of a broader mix of interventions.

The goal of this survey is to provide a systematic overview of the literature that has analysed the interplay between population dynamics, ageing, health and migration, aimed at offering policy-makers a sound understanding of the state of the art in this important research area. At the same time, we will identify key issues where more research is needed both to foster our knowledge, as well as to provide guidance for effective policy interventions. The review is carried out from the perspective of the economics literature, but given the complexity of the question we also refer to relevant studies carried out by demographers and sociologists.