This paper argues that immigration can help to alleviate the burden
ageing presents for the welfare states of most Western Economies. We
develop a macroeconomic framework which deals with the impact of both
ageing and immigration on economic growth. This is combined with a
detailed model of the labour market, to include the interaction with
low-skilled unemployment. The empirical relevance of some crucial model
assumptions is shown to hold for the Netherlands, 1973 - 2009, using a
vector-error-correction model. The conclusions from the analysis of
transitory and permanent shocks are that immigration will help to
alleviate the ageing problem in the long run, as long as the immigrants
will be able to participate in the labour force at least as much as the
native population. Moreover, the better educated the immigrants are or
become, the higher their contribution to growth will be.
Key words: ageing; immigration; unemployment; skills.
JEL-codes: E24 F22 O15 O52