Volume 24 Issue 1 Article 3 
March 2022 
Life Cycle Surplus and Life Cycle Deficit of Immigrants versus 
Natives 
Persida Cica Tofoska Apostolova 
University of Ljubljana, School of Economics and Business, PhD Candidate, Ljubljana, Slovenia 
Tanja Istenič 
University of Ljubljana, School of Economics and Business, Ljubljana, Slovenia 
Jože Sambt 
University of Ljubljana, School of Economics and Business, Ljubljana, Slovenia, joze.sambt@ef.uni-lj.si 
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Recommended Citation 
Tofoska Apostolova, P. C., Istenič, T., & Sambt, J. (2022). Life Cycle Surplus and Life Cycle Deficit of 
Immigrants versus Natives. Economic and Business Review, 24(1). https://doi.org/10.15458/
2335-4216.1296 
This Original Article is brought to you for free and open access by Economic and Business Review. It has been 
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Review. 
ORIGINAL ARTICLE
Life Cycle Surplus and Life Cycle Deficit of
Immigrants Versus Natives
Persida Cica Tofoska Apostolova a, Tanja Isteni
c b, Jo
ze Sambt b,*
a University of Ljubljana, School of Economics and Business, PhD Candidate, Ljubljana, Slovenia
b University of Ljubljana, School of Economics and Business, Ljubljana, Slovenia
Abstract
Recently, immigration and its socio-economic aspects have been in the centre of the European Union leaders’ agenda.
In this paper, we apply the National Transfer Accounts (NTA) methodology to calculate the complete set of NTA results
for immigrants and natives in five EU countries. We find that due to the lower labour income, which cannot be offset by
the lower consumption, immigrants experience a shorter independence period and a much lower aggregate life cycle
surplus than natives. The identified cross country differences between immigrants and natives could be used as a proxy
of the achieved level of integration of immigrants.
Keywords: National transfer accounts, Immigrants, EU countries, Economic independence, Life cycle deficit financing
JEL classification: J15, J18, D64
Introduction
I n recent years, immigration and the socio-eco-nomic aspects of migration have become a central
topic of the European Union (EU). Although lately
the emphasis is placed on the possible new wave of
refugees, immigration in EU has been a continuous
process since World War II (de la Rica et al., 2015).
The economic circumstances were changing during
that period which caused alterations in the dy-
namics and substance of immigrants’ flows. There
are at least four different phases that can be iden-
tified here: (i) migration as a result of post-war
adjustment and decolonisation, (ii) labour migration
between 1960 and 1973, when the rapid economic
growth created huge demand for workers, (iii)
restrained migration due to deep recession
following the oil shock, and (iv) migration due to
dissolution of socialism and later on, in times of
asylum seekers, refugees and illegal immigration.
Further, two processes can be identified: the first
process involves Eastern Europeans with more
freedom to travel starting to enter Western Europe,
and the other process is the continuous flow of
people from different places in the world affected by
war conflicts (Stalker, 2002). This last phase still
explains the migration processes in the last decade,
in addition to the effect of the EU enlargement by 10
Central and Eastern European countries in 2004,
and Romania, Bulgaria and Croatia in the later
years. Since EU has been obliged to ensure free
movement of people among the member countries,
the flow from east to west remains important along
with other free movements across EU countries.
In 2015, Europe as a continent counted for around
75 million migrants or 31 per cent of the total in-
ternational migrant stock. There are some similar-
ities across countries in terms of the economic,
social and cultural effects of migrants on the do-
mestic population, but there are also many differ-
ences and complexities which raise various
questions and challenges for national policy makers
(International Organization for Migration, 2017).
The EU countries might perceive immigration as
an opportunity to mitigate the negative impact of
the ageing population on the labour market and the
Received 5 May 2019; accepted 29 August 2019.
Available online 17 March 2022.
* Corresponding author.
E-mail addresses: ctofoska@gmail.com (P.C. Tofoska Apostolova), tanja.istenic@ef.uni-lj.si (T. Isteni
c), joze.sambt@ef.uni-lj.si (J. Sambt).
https://doi.org/10.15458/2335-4216.1296
2335-4216/© 2022 School of Economics and Business University of Ljubljana. This is an open access article under the CC-BY-NC-ND license (http://creativecommons.
org/licenses/by-nc-nd/4.0/).
sustainability of public finances. It is assumed that
selective immigration of young, educated, skilled
individuals, filling shortage occupations is beneficial
for the economic “well-being” of the immigrant
receiving countries (Zimmermann, 2005). However,
is it possible to establish immigration policies for
attracting the desired immigrants? More impor-
tantly, do immigrants with the desired characteris-
tics achieve the expected market labour outcomes?
In the past, there have been numerous studies
investigating the labour gap and the reasons for
immigrants' limited employment success and their
wage differences compared to natives. The main
goal of this paper is to use the novel data on im-
migrants from the National Transfer Accounts
(NTA) in order to examine not only the labour gap
but also differences in consumption and the eco-
nomic behaviour of immigrants in general. Thus,
our study aims to confirm the previous literature
conclusions for lower labour income of immigrants
than natives, and in addition to identify the lower
level of the immigrants’ consumption which might
be an adjustment mechanism for preserving their
economic independence. Furthermore, NTA results
provide data to analyse how immigrants and natives
finance the gap between the consumption and la-
bour income, i.e. to what extent they rely on public
transfers which is an important aspect in terms of
the ongoing population ageing process.
For assessing the economic impact of immigra-
tion, we analyse the production and consumption
patterns over the life cycle. We use the concept of
life cycle deficit as defined by the NTA methodology
(Lee & Masson, 2011). By allocating all categories of
income and consumption by age, we identify the
age period of economic independence, i.e. a ‘life
cycle surplus’ as well as the age periods of economic
dependency for the young and the elderly in which
labour income falls short of consumption for both
immigrants and natives. The NTA shows how the
excess consumption of individuals over their own
labour income, also called a ‘life cycle deficit’, is
financed through the public transfers (e.g. public
education, health, long-term care), private transfers
(e.g. parents financing food, clothing, housing etc. of
their children) and interaction with the capital and
financial markets (e.g. dividends received, loans
taken).
In this paper, we examine the difference between
the life cycle surplus of immigrants and natives by
comparing their age span of the economic inde-
pendency period and the size of their economic in-
dependence. Furthermore, we examine how the
difference between age-specific consumption and
age-specific labour income (i.e. life cycle deficit) is
financed for the immigrants versus natives in the
old age.
The contribution of the paper is twofold. First, we
analyse the differences between immigrants and
natives in economic flows by age. Second, we pro-
vide a cross-country comparison. The cross-country
differences between immigrants and natives could
also be used as a proxy of the achieved level of
integration of immigrants in the analysed countries.
We provide the results for five European countries
that have all the required data available: Belgium,
Cyprus, Estonia, Ireland and Sweden. The diversity
among these countries enables us to shed some light
on the potential factors of the differences.
The paper is structured as follows. The next sec-
tion provides a literature review on the differences
in labour income and consumption over the life
cycle, as well as the differences in financing the life
cycle deficit between immigrants and natives. Sec-
tion 2 presents the NTA methodology and how the
economic flows of natives and immigrants are
calculated. Section 3 presents the stylized facts for
immigrants in the analysed countries and the NTA
results by the immigration status across countries.
The last section concludes the article.
1 Background
1.1 Immigrants' versus natives’ labour income
Age is the central economic characteristic of in-
dividuals that determines their ability to produce
and their consumption needs. The labour income
estimated by the NTA approach shows the average
market value of labour income in each age group. It
reflects the variation in employment rates, hours
worked and hourly wages across age. Thus, the
difference in labour income between immigrants
and natives reveals different labour force partici-
pation and unemployment rates (defining the
employment rates as the difference between these
two) and different labour income composed of gross
wages, self-employment labour income, social
contribution and fringe benefits at a specific age
(Lee & Ogawa, 2011).
The differences in labour force participation rates
of immigrants and natives are mainly driven by the
difficulties in the labour market integration of im-
migrants. Employment rates of immigrants are
lower than of natives, whereas the unemployment
rates are higher (OECD, 2016). There is a vast body
of literature trying to identify the determinants of
the weak labour integration (Adsera & Chiswick,
2007; de la Rica et al., 2015; Kogan, 2004; Uhlendorff
& Zimmermann, 2014), classifying them into the
ECONOMIC AND BUSINESS REVIEW 2022;24:36e51 37
micro and macroeconomic levels. At the micro level,
the most important predictors of lower access to
jobs and lower level of wages are individuals'
characteristics, i.e. human capital. At the macro
level, the strongest impact on the employability of
immigrants are the immigrants’ destination country
and the country of origin (Fleischmann & Dronkers,
2010).
The main determinants related to human capital
are education, experience, training, language profi-
ciency and the immigrants' age. The level of edu-
cation, type and years of experience as well as
obtained training are important determinants but
more in the context of how much they are valued in
the destination country (Clark & Drinkwater, 2008;
Zimmermann, 2005). Friedberg (2000) argues that
human capital is imperfectly portable across coun-
tries. She finds that the education of immigrants
coming from countries with a more similar educa-
tional system and economy is more valued. In such
cases, the employment opportunities for immigrants
and the return to education are more similar to
natives. Likewise, the experience obtained abroad is
often differently valued in both earnings and the
employment probability (Blackaby et al., 2002; Kee,
1995). In line with these findings, over-qualification
of immigrants coming from the EU10 countries, who
have occupied low skill jobs in the UK, Ireland and
other EU countries (Barrett et al., 2006; Drinkwater
et al., 2009; OECD, 2007) is also observed. Never-
theless, Uhlendorff and Zimmermann (2014) find
some evidence that high skilled immigrants have a
higher probability of leaving unemployment than
low skilled immigrants.
Immigrants’ knowledge and proficiency of the
destination country language is stated as the key
determinant of the success of immigrants in the la-
bour market. Clark and Drinkwater (2008) argue
that this is reasonable as communication skills have
become even more important in the modern service
and knowledge-based economies. Peri and Sparber
(2011) perceive the lack of language proficiency as
different skill endowments of immigrants and na-
tives, where natives are comparatively stronger in
communication skills intensive jobs, while immi-
grants are superior in manual skills intensive jobs
leading to lower wages. Consequently, immigrants
tend to prevail in certain occupations and industries.
This occupational segregation renders immigrant
labour outcomes vulnerable to the industry perfor-
mance and development (Ottaviano & Peri, 2012).
The skill differences seem to point out the possible
difference in productivity, which is a key economic
factor for the differences in wages. However, the
study conducted on a firm level and controlled for
productivity effects reveals that differences remain
even after controlling for productivity. Hence, it
suggests that there is a wage discrimination against
immigrants (Kampelmann & Rycx, 2016).
The age at arrival is reported by Schaafsma and
Sweetman (2001) as a factor that is negatively
related to the immigrants’ earnings. The explana-
tions relate both to the human capital and language
proficiency: the older the immigrants are at the time
of entry, the less likely it is for them to obtain edu-
cation in the destination country, and their ability to
master the language diminishes.
Besides the human capital characteristics, we
argue that there are three dominant factors that
affect the immigrants’ success in the labour market:
(1) country of origin, (2) reasons for immigration and
(3) duration of stay in the country.
First, both statistical data and studies (OECD,
2014; OECD, 2016) show that the country of origin is
important for the employability of immigrants
(Adsera & Chiswick, 2007). While high-skilled im-
migrants from developed countries experience
similar (un)employment rates to natives, that is not
the case for the rest of immigrants (Kogan, 2004).
The difference in the level of development of the
country of origin and the destination country is the
main reason for the variation in the level of wages.
When both countries are at the same level of
development, immigrants face similar level of
employment and wages compared to natives
(Fleischmann & Dronkers, 2010; Kogan, 2004).
Second, Scarpa (2016) is one of those who has
investigated how the reason for immigration affects
the labour outcomes. His study reveals that the
immigrants in Genoa (Italy) and Malm€o (Sweden)
originated from less developed countries, but
differed in their type of entry and reasons for
immigration. Immigrants in Genoa, often coming
illegally but with clear work objective, turned out to
be much more labour involved, as their skills cor-
responded to the skill shortage in this city. In
contrast, immigrants in Malm€o arrived legally on
the basis of family reunification, humanitarian and
other reasons, but could not respond to the labour
market demand and achieved poor labour out-
comes. The reason for immigration (the broadest
classification being: economic, family integration or
asylum reasons) refers to the type of entry, which is
presumably available from residence permit regis-
ters. This information is easy for monitoring immi-
grants (in)flows, but not reliable nor useful for
monitoring and analysing of immigrant stocks and
as such hinders this kind of research. Another
source that studies use in order to assess the
importance of the entry category is the survey data
38 ECONOMIC AND BUSINESS REVIEW 2022;24:36e51
(the most important being the special module of the
Eurostat employment Survey in 2008), but often
these data differ from the data in residence permit
registers (OECD, 2012b).
Third, the difference in the (un)employment rates
and wages tends to decrease with the longer stay of
immigrants in the country. Recent immigrants,
defined as those who have arrived within the last 5
years, have lower employment rates and higher
unemployment rates than settled immigrants and
these differences are additionally higher when
compared to natives (OECD, 2016). The study that
compared immigrants' and natives’ earnings in 15
European countries revealed that the immigrant-
native earnings gap narrows with longer stay in the
destination country and that it disappears after
about 18 years (Adsera & Chiswick, 2007).
1.2 Immigrants' versus natives’ consumption
In contrast to the vast literature on labour market
outcomes, the consumption behaviour of immi-
grants seems to be under-researched. Ballester et al.
(2015) identify lower consumption levels in Spain of
the households whose household head is immi-
grant. The difference is more pronounced in times
of crisis when those households' consumption re-
duces more than the consumption of households
where the household head is a native. Two studies
based on Italian data find a difference between the
consumption levels of natives and immigrants, and
of legal and illegal immigrants (Barigozzi & Spe-
ciale, 2011; Dustmann et al., 2017). They show that
the consumption level of legal immigrants and na-
tives is different, but tend to slowly converge with
the immigrants’ longer stay. On the other hand,
illegal immigrants consume 40% less than legal
immigrants, conditional on their background char-
acteristics. Only one quarter of this consumption
gap is explained by lower incomes of illegal immi-
grants compared to legal immigrants.
Finally, while labour gap has been widely investi-
gated and the consumption behaviour of immigrants
has been in the focus of few studies, it seems that no
attention has been devoted to the difference between
labour income and consumption, defining economic
(in)dependency of immigrants versus natives. Here
we see a theoretical and empirical gap and try to
shed some light on this highly relevant topic.
1.3 Financing the life cycle deficit in the old age of
immigrants versus natives
Changes in the demographic and economic life
cycle pertinent for modern societies (as opposed to
hunter-gathers societies) have led to the phenomenon
of old age dependency (Lee, 2000). The longevity of
people and low fertility that resulted in population
ageing further emphasized the importance of the way
the old-age dependency (life cycle deficit) is financed.
Immigrant population is also ageing in many Euro-
pean countries (Baykara-Krumme, 2008; Lanzieri,
2011; VanMol& de Valk, 2016) and the number of old
immigrants is expected to rise further (Schimanyet al.,
2013). Thus, it is important for the destination coun-
tries to be informed not only about the level of the
immigrants’ economic dependence during the work-
ing age period, but also about the extent to which old
immigrants rely on (intergenerational) public and
private transfers. Intergenerational transfers burden
working age, young and future generations, as
opposed to the reliance on their own previously
accumulated assets.
Public transfers to and from immigrants have
been extensively elaborated in the literature, aiming
to assess the overall impact of immigrants on public
finances (Auerbach & Oreopoulos, 2000; Lee &
Miller, 2000; B€oheim & Mayr, 2005; Chojnicki, 2013;
Preston, 2014). Based on the most relevant studies
for Europe and USA, it seems that there is no sig-
nificant impact of immigrants on the public finances
ranging to max þ- 1% of GDP, and that the policies
shall be based on other possible immigration im-
plications (Rowthorn, 2008). With regard to private
transfers, their level primarily depends on the gen-
erosity of the public systems and the welfare state
provisions and to a lesser extent to family norms, so
only limited differences in support between immi-
grants and natives have been identified (Bordone &
de Volk, 2016). Private transfers are strongly
downward (parent-child) in every economy out of
23 countries for which NTA results have been
calculated in Lee and Masson (2011) and not an
important source for financing old age dependency.
However, upward private transfers are found in
families with high poverty or where elderly have no
access to adequate pension, which is sometimes the
case of first-generation immigrants from developing
countries (Attias-Donfut & Wolff, 2008; Baykara-
Krumme, 2008). Saraceno (2010) found that more
time for care and support is provided to individuals
with low socio-economic status and by their chil-
dren with low income. With regard to asset accu-
mulation and transfers for old age, Escriva (2013)
based on Peruvian and Moroccan immigrants in
Spain concludes that middle-aged immigrants have
limited possibilities to save and invest, due to the
high unemployment rates and low wages, as well as
due to spending a lot of resources on their old
parents.
ECONOMIC AND BUSINESS REVIEW 2022;24:36e51 39
2 Data and methodology
2.1 NTA methodology
In our analysis, the immigrant is defined as a
person whose country of birth is different from the
country of usual residence (in which the respondent
was surveyed). Given the nature of the surveys, only
legal immigrants are expected to be included. This
seemingly clear definition might be challenged, if
country borders have changed in the past e for
example, the Estonian-Russian national border.
Namely, people born in a place which is at the time
of the survey outside the national territory but feel
that they are national citizens, their country of birth
is entered according to this citizenship (Eurostat,
2011). We need to have this in mind when inter-
preting the results, since some country differences
might be originating from this fact.
In order to examine the difference between the life
cycle deficit of immigrants and natives, we use the
relatively new NTA methodology and for the first
time decomposed NTA results by immigration sta-
tus. The main motivation for introducing the Na-
tional Transfer Accounts was a better understanding
of the generational economy and the economic
flows across age groups. The NTA are consistent
with the System of National Accounts (SNA) and
complement them by introducing the age dimen-
sion. The NTA results have been already calculated
for more than 70 countries across the globe and
provide invaluable, consistent and comparable
input for academic research but also for social and
economic policies (http://www.ntaccounts.org/).
Age is a fundamental characteristic of individuals
in defining their economic behaviour. In general,
three phases in the course of life can be identified: 1)
young age when individuals consume more than
they produce and have to rely on the resources from
others, 2) working-age when the production exceeds
consumption and the resources are left for (co-)
financing the consumption in the other two phases,
and 3) old age when labour income again falls short
of consumption (Lee, 2000). This pattern is general
across all countries, but there are important differ-
ences in ages at which individuals are economically
(in)dependent, in the size of economic (in)depen-
dence and how the periods of dependence are
financed. The NTA key concept e the life cycle
deficit e is defined as the age-specific difference
between consumption and labour income and en-
ables us to measure the individuals’ economic
dependency.
The gap between consumption and labour income
can be financed through private transfers (for
example parents financing their children's con-
sumption), public transfers (publicly financed pen-
sions, education, health etc.) or asset-based
reallocations that result from participation on capital
and financial markets. This relation is presented with
the following flow identity (Lee & Masson, 2011):
Cx YLx|fflfflfflfflffl{zfflfflfflfflffl}
Lifecycle deficit
¼ tþx  tx|fflfflfflffl{zfflfflfflffl}
Net transfers
þ YAx  Sx|fflfflfflfflffl{zfflfflfflfflffl}
Assetbased reallocations
; ð1Þ
where Cx denotes consumption; YLx labour income;
tþx transfers received; t

x transfers given; YAx asset
income; and Sx savings. The general approach of the
NTA is to combine survey data and various other
data sources to create a relative position of the NTA
categories for each age group and then by adjusting
those relative ‘age profiles’ (using the population by
age) to meet the aggregate controls from SNA orein
the case of the EU countries e the European System
of Accounts (ESA). Next, the main categories of the
flow identity shown in Equation (1) are elaborated.
The NTA methodology is presented in the United
Nations (2013) manual. For specifics of the European
NTA see also Isteni
c et al. (2017).
2.1.1 Labour income
Labour income as defined by the NTA represents
the workers' compensation in its broadest sense,
including gross wages, employer's contribution and
fringe benefits. The labour income consists of
earnings of employees and the labour income of
self-employed. Earnings include wages and salaries
and the employer's social contributions, domestic
and those from the rest of the world. The main
category of earnings are gross wages. Additionally,
earnings include all the payments that a worker
receives as the result of his/her labour input, like
holiday leave payment, compensation for food and
transportation or any other payment provided by
the organisation in which he/she works, as well as
non-cash employee income (e.g. private use of a
company car). Earnings of employees represent the
largest part of total labour income, while labour
income of the self-employed is a much smaller
component.
In our case, the data refer to 1-year age groups.
The labour income age profile is calculated as a
weighted average of income components from the
EU Statistics on Income and Living Conditions (EU-
SILC) survey. This survey also contains data on cash
benefits or losses from self-employment on the in-
dividual level. The obtained relative age profile is
adjusted to the ESA aggregates of mixed income.
Because the ESA aggregates of mixed income
include both return on labour (i.e. self-employment
40 ECONOMIC AND BUSINESS REVIEW 2022;24:36e51
income) and the return on capital of household
enterprises, the NTA uses a simple assumption of
allocating two-thirds of mixed income to labour in-
come and one-third to the capital income (based on
empirical evidence, e.g. Gollin, 2002).
2.1.2 Consumption
Consumption consists of private and public con-
sumption. In the NTA framework, private and
public consumption are both decomposed to edu-
cation, health and other private or public con-
sumption. This distinction is motivated by the
strong age patterns of the education and health
expenditures.
Data on private consumption are obtained from
the Household Budget Survey (HBS) for 2010 that
Eurostat made available in 2016 for most EU coun-
tries. Since private consumption is reported on the
household level, various methods are used to allo-
cate household expenditures to individual house-
hold members. For allocating the private
expenditures on health by age, a linear regression
model (without a constant term) is applied. By using
the regression method, the total household expen-
ditures are regressed on the number of household
members in each age group. The relative size of
regression coefficients (representing weights for
individuals of different ages) is used to allocate
household expenditures to individual members
within each individual household. In the case of
private education expenditures, we distribute
household expenditures for a specific level of edu-
cation equally among the household members
enrolled in that particular level of education. Other
consumption (excluding health and education) is
allocated by applying the modified Deaton's (1997)
equivalence scale. The NTA approach assumes the
equivalence scale of 0.4 for children age four or
younger, a linear increase from 0.4 to one between
age four and age 20, and one for adults aged 20 or
older.
Data for public consumption are mainly based on
administrative data. To allocate public expenditures
on education by age, we split final public con-
sumption on education between different levels of
education. Within each level of education, we use
age- and level-specific enrolment rates to calculate
relative per capita expenditures. We assume that
within each level of education, the expenditures per
enrolled student are the same regardless of the
student's age.
Public health consumption allocated by age is
taken from the Ageing Working Group (AWG)
(2012). AWG uses the age distribution of health for
the long-term projections of public expenditures.
The ‘other public consumption’ category consists of
collective consumption such as government expen-
ditures on defence, police, administration, building
and repairing public roads, etc., and individual
consumption such as in-kind social benefits for
disability and sickness, old age, unemployment,
family and children, etc. In the case of collective
consumption, it is assumed that all individuals are
beneficiaries; therefore, the uniform distribution of
expenditures across age is used. For individual
‘other’ consumption, the public expenditures are
allocated to the beneficiaries of particular public
programmes, mainly by using the information on
cash transfers reported in the EU-SILC.
2.1.3 Transfers
As presented in Equation (1), the age reallocations
through which the gap between consumption and
labour income is financed consist of two compre-
hensive, mutually exclusive flows e transfers and
asset-based reallocations. In the NTA, transfers are
defined as in-kind and in-cash transfers between
the private sector and the public sector, as well as
between different private institutions. While the
public sector is defined as general government, the
private sector consists of households, non-profit
institutions serving households, and profit and non-
profit corporations. Some of these flows can be
directly estimated from the SNA/ESA. Some require
modification and others (such as intra-household
transfers) have no SNA/ESA counterpart.
Net public transfers are the difference between
public transfer inflows and public transfer outflows.
Public transfer inflows refer to the flows that are
mediated by the government, including both in-
kind and in-cash transfers received by individuals.
Public transfers in-kind are public education, public
health care and defence to name few, while public
transfers in-cash are public pensions, unemploy-
ment benefits, family and child allowances, etc.
Public inflows are assigned to the individuals who
are their beneficiaries. While in-kind public transfer
inflows are equal to the public consumption, public
transfers in-cash are estimated using the EU-SILC
data where individuals report how much money
they have received in transfers. On the other hand,
public outflows are economic flows from private to
public sector, mainly consisting of different kinds of
taxes and social contributions that individuals pay to
the government or local authorities.
Private transfers include transfers between
different households (inter-household transfers) and
transfers within the same household (intra-house-
hold transfers). One of the main contributions of the
NTA methodology is its comprehensive measuring
ECONOMIC AND BUSINESS REVIEW 2022;24:36e51 41
of intra-household transfers. This was not possible
earlier, since transfers within households are not
reported in SNA. Even though at the aggregate level
intra-household transfers are equal to zero, they
represent a very important category of the inter-
generational transfers. While the inter-household
transfers age profiles are estimated directly using
EU-SILC, the intra-household transfers are indirectly
estimated as a balancing item between private con-
sumption and disposable income, where disposable
income includes labour income, cash transfers less
taxes paid and net inter-household transfers.
Household members whose disposable income falls
short of consumption are in deficit and therefore
receive transfers from other household members
with a surplus. If the total household deficit is larger
than the total household surplus, the household head
makes transfers out of asset income, i.e. he/she dis-
saves (Lee & Masson, 2011).
2.1.4 Asset-based reallocations
The asset-based reallocations consist of private
and public reallocations, whereby private realloca-
tions are more important. Asset-based reallocations
consist of 1) asset income, including capital income
and property income and 2) savings, whereas the
asset income is an inflow and saving (if positive) is
an outflow (Lee & Masson, 2011). Private capital
income consists of capital income of corporations,
income from owner occupied housing, and unin-
corporated enterprise income (i.e. capital share of
mixed income). Private property income consists of
flows generated by financial assets such as interests,
dividends and rents. Assets (reported only at the
household level) are assumed to be owned by the
household head.
2.2 NTA for immigrants and natives
Estimating age profiles from the survey data (e.g.
labour and asset income, private consumption, in-
cash public transfer inflows), separately for immi-
grants and natives, is straightforward, i.e. we
calculate immigration status-specific averages,
instead of the total age-specific averages. In both
micro-level datasets, EU-SILC and HBS, we define
immigrants as all those household members whose
country of birth is different from the country of
residence. Since in EU-SILC individuals report the
year of immigration, all those with a missing value
at the variable country of birth are also treated as
immigrants if they have reported the year of
immigration.
To estimate age profiles based on administrative
data, some further procedures are used. For
example, in the case of public consumption on ed-
ucation, survey data is used to estimate enrolment
rates by age for immigrants and natives separately.
Even though we were expecting that the access of
immigrants and their children to (particularly
higher) education might be limited, our results
show that enrolment rates of immigrants and na-
tives are rather similar. In Estonia, Sweden and
Belgium, the enrolment rates of immigrants at
young adult ages are even higher than of natives.
The individual public consumption (other than ed-
ucation and health) is mainly estimated using the
EU-SILC data and the collective public consumption
is uniformly distributed. The only component of
public consumption which we cannot allocate to
immigrants and natives separately is public con-
sumption on health. Therefore, the potential differ-
ences in public health consumption between both
groups are not captured. However, from survey we
see that the educational levels of people aged 50þ
are rather similar for both immigrants and natives.
Since health condition strongly correlates with ed-
ucation, we expect similar health needs for both
groups. Still, there could be potential differences
regarding the access to those services.
The macroeconomic aggregates calculated from
SNA are available only for the total economy.
Therefore, the obtained age profiles for immigrants
and natives are adjusted to match the total age
profiles (for immigrants and natives combined). In
this way, the sum of the products between immi-
gration status-specific per capita age profiles and
immigration status-specific population equals the
value of per capita total age profile multiplied by the
total population. Population data on immigrants
and natives is estimated by using the Census Hub
2011 database (Eurostat, 2015). We take shares of
immigrants and natives from the 2011 census data
and apply them to the 2010 population from our
analysis, taking into account that immigrants and
natives were one year younger in 2010. For example,
the share of immigrants and natives of age x in 2011
is used to estimate the share of immigrants and
natives of age x-1 in 2010.
2.3 Measuring the gap in economic independence
between immigrants and natives
The life cycle deficit as a central category in the
NTA methodology can be used for various eco-
nomic analyses and indicators. A positive life cycle
deficit is pertinent in the age of childhood and in the
old age. During these periods of life, the labour in-
come falls short of consumption and the deficit
(LCD) is financed by private or public transfers or
42 ECONOMIC AND BUSINESS REVIEW 2022;24:36e51
by asset income or debt/dissaving. On the contrary,
in a large part of the working age period, an indi-
vidual experiences negative life cycle deficit e i.e.
positive lifecycle surplus (LCS). Following the NTA
approach, we calculate the start and the end of the
immigrants' and natives’ independency period
(indicating the age span of positive LCS) in the
analysed countries, which represents our first
indicator.
However, it is not only important to look at the
length of the economic independence, but also the
size of this independence. Therefore, our second
indicator captures the gap between the immigrants'
and natives’ economic independence level by
measuring the difference in the LCS of immigrants
and natives, relative to the LCS of natives.
LCS immigration gap¼LCS
I  LCSN
LCSN
¼
Pu
x¼lðYLx CxÞI 
Pu
x¼lðYLx CxÞNPu
x¼lðYLx CxÞN
; ð2Þ
where YL denotes labour income, C consumption;
notation I refers to immigrants and N to natives; l is
age at which independence period starts and u age
at which independence period ends. In order to
eliminate the effects of the different share of immi-
grants relative to natives across countries, we use
the European standard population (Eurostat, 2013)
for both immigrants and natives. The ‘LCS immi-
gration gap’ indicator measures the relative differ-
ence between the LCS of immigrants and natives. It
captures the lower capability of immigrants for
transferring to other age groups and/or generating
savings compared to natives.
3 Results
3.1 Basic information on immigrants in the
analysed countries
Among the EU countries, the required data for the
NTA calculations were available only for the
following five countries: Belgium, Cyprus, Estonia,
Ireland and Sweden. All except Cyprus are also
members of the Organization for Economic Coop-
eration and Development (OECD). In 2010, their
population varied from 0.8 million in Cyprus to 11.0
million in Belgium, and the unemployment rates
ranged from 6.3% in Cyprus to 16.7% in Estonia (see
Table 1). This indicates large differences among
countries that have also been differently affected by
the crisis. Estonia and Ireland had been more
severely affected at the beginning of the economic
crisis (up to 2010), which in turn had a great impact
on the overall and on the immigrants’ employment
and unemployment rates (OECD, 2016).
The share of immigrants in the total population
ranges from 13.9% in Sweden to 20.0% in Cyprus.
The share of immigrants in the working-age popu-
lation is higher than the share of immigrants in the
total population. This is a result of the dominant age
interval of immigrant flows being 15e24 years of age
(OECD, 2016) and the size of immigration flows in
the past. The only exception is Estonia, where im-
migrants are more represented in higher ages
(Eurostat, 2017) and might be related with the
changes in the country border between Estonia and
Russia after World War II.
Since the country of origin is assessed to have an
impact on the employment rates and income out-
comes, Fig. 1 presents the composition of immi-
grants by the continent of origin, for the analysed
countries in 2010. The national composition of im-
migrants varies considerably across countries and is
mainly a result of former colonial links if any,
former areas of labour recruitment, and ease of
entry from neighbouring countries (Stalker, 2002).
Belgium immigrant segments partly reflect the
former colonial links with Africa, but also labour
migrants and refugees from Eastern Europe and
Asia. The latter also holds for Sweden, where
immigration flows are additionally strengthened by
immigrants received on family reunification and
humanitarian basis. Cyprus immigrants' structure is
Table 1. Total population, immigrants and unemployment rates in 2010 by country.
Country Total
population
Immigrants Immigrants as share
of total pop. (%)
Population
15e64
Immigrants
aged 15e64
Imm
(15e64)/
Pop (15e64)
(%)
Unempl.
rate (%)
Unempl. rate,
immigrants
(%)
Belgium 11,000,638 1,628,812 14.8 7,249,774 1,290,918 17.8 6.9 10.0
Cyprus 771,797 154,719 20.0 534,570 134,164 25.1 6.3 N/A
Estonia 1,294,455 197,364 15.2 864,961 116,782 13.5 16.4 22.8
Ireland 4,525,230 766,719 16.9 3,022,537 636,584 21.1 13.1 16.9
Sweden 9,331,080 1,299,285 13.9 6,045,650 1,023,125 16.9 7.1 16.3
Note: “N/A” stands for “Not Available”.
Sources: Eurostat, 2017; OECD, 2012a; own calculations.
ECONOMIC AND BUSINESS REVIEW 2022;24:36e51 43
rather a combination of European and Asian im-
migrants, where the European part is due to colonial
links, as it used to be a British colony, but also
because of the ease of entry for Bulgarians and
Romanians after their EU accession. The Asian part,
however, is a result of the Soviet Union dissolution
and due to the less developed countries nearby.
Rather specific is Estonia, where the geopolitical
changes led to border shift and now Russia accounts
for 71% of all immigrants. Finally, the immigrants’
structure in Ireland reflects the liberal work permit
policy to attract economic migrants for compensa-
tion of skill shortage (Mahroum, 2001). The high
economic growth in the period 2000e2007 and the
decision to allow full access to the labour market for
citizens of new member states in 2004 led to a surge
in the number of immigrants in Ireland (Barrett &
Kelly, 2012). A great share of immigrants refers to
recent immigrants coming from high-income OECD
countries and on average being more educated than
across OECD countries.1
Next, there is a greater discrepancy in unem-
ployment rates between natives and immigrants in
Belgium and Sweden. This is in line with our dis-
cussion in Section 2 that greater differences are ex-
pected when the reason for immigration is not
finding a job. Namely, in the European Union La-
bour Force Survey (2008 ad hoc module) only 17%
(Belgium) and 10% (Sweden) of immigrants re-
ported employment as reason for migration. In both
countries, around 58% of immigrants reported
family reunification as a motive for immigration
and in Sweden 18% of immigrants reported
humanitarian reasons. On the contrary, in Ireland
unemployment rates of immigrants are not much
higher than of the natives. This is in line with the
survey results where 40% of immigrants reported
employment as a reason for immigration and only
38% family reunification (OECD, 2012b). Even
though no data are available for the unemployment
rates of immigrants in Cyprus, one could expect that
they are not drastically different than those of the
natives. That is due to the two main types of im-
migrants. First are the (British) Cypriots that once
migrated to the UK and other developed countries
in the 1950s and 1960s and have returned back to
Cyprus in the early years of the 21st century
(Teerling, 2011). They had no language proficiency
and human capital valuation constraints e thus
excellent prerequisites for employment. The second
type of immigrants are the young workers from
Romania and Bulgaria that entered the country
(after Romania and Bulgaria became the EU mem-
bers) and other third country nationals occupying
mainly the low paid industries where skill shortage
existed (Christofides et al., 2009).
3.2 NTA results: labour income, consumption and
economic independency
3.2.1 Labour income
The age profile of labour income has a typical
inverted U-shaped curve. As explained in the meth-
odology part, it reflects both 1) the earnings (gross
wages including employers’ social contributions) and
self-employment labour income, aswell as 2) the level
0%
20%
40%
60%
80%
100%
Belgium Cyprus Estonia Ireland Sweden
Oceania
S.C. America
N.America
Asia
Africa
Europe non EU
Europe EU
Fig. 1. Immigrants by continent of origin. Source: OECD (2010 data).
1 As of 2012, Ireland has been in 7th place in the OECD in terms of the share of immigrants in its population, where 46% of them arrived in the last 5 years
compared with 22% on average across OECD countries. Immigrants are on average more educated than across OECD countries, and count for 43% of
highly educated compared with 31% across OECD countries, where 66% come from OECD high-income countries (www.oecd.org/migration/integration-
indicators-2012/).
44 ECONOMIC AND BUSINESS REVIEW 2022;24:36e51
of employment at a certain age. Fig. 2 presents the
labour income age profiles for natives and immigrants
in each of the analysed EU countries and also the
average of all five countries. To make per capita age
profiles comparable between countries, we normalise
them with the average labour income of individuals
aged 30e49. This is a commonly used approach in the
NTA framework to eliminate cross-country differ-
ences in the level of income, inflation rates, exchange
rates, etc. (Lee&Masson, 2011). The age group 30e49
is perceived as a stable denominator, being only in a
small extent affected by different labour market en-
tries and exits across countries. The average labour
income is a simple average of the per capita labour
income for persons of age 30e49.
Fig. 2 shows that the labour income of immigrants
is lower than of the natives at almost all ages in all
countries. Both immigrants and natives start to enter
the labour market at about age 15. Nevertheless, the
labour income of immigrants on average increases
at lower pace and is equal or slightly greater than
that of natives only in certain old ages. That is
mainly due to the difficulties entering the labour
market (OECD, 2016), because of lacking country
specific skills, high number of low-skilled immi-
grants, wage discrimination of immigrants, lower
negotiating power, accepting low-skill jobs, etc.
In Belgium, Estonia and Sweden, the difference in
labour income between immigrants and natives is
large throughout the entire working age period. The
most striking differences are in Belgium at the age
of 28 and in Estonia at age 26 when immigrants
receive 46% and 40% less income than natives,
respectively. The finding of lower labour income of
immigrants is in line with the literature that we
presented earlier and the statistical data. Namely, in
Belgium and Sweden the immigrant structure by
type of entry is not labour migration and there are
no skill shortages driven policies in place. Further-
more, the country of origin of those immigrants is
probably at a different level of economic develop-
ment than the destination country. Also, the desti-
nation language knowledge of immigrants is low
and requires long time to learn (except migrants
from former colonies). With regard to Cyprus, there
is also striking difference in the labour income of
both groups, which tends to disappear in the late
working age. Moreover, immigrant labour income
0.0
0.2
0.4
0.6
0.8
1.0
1.2
0 10 20 30 40 50 60 70 80+
Age
Average (5 countries)
0.0
0.2
0.4
0.6
0.8
1.0
1.2
0 10 20 30 40 50 60 70 80+
Age
Belgium
0.0
0.2
0.4
0.6
0.8
1.0
1.2
0 10 20 30 40 50 60 70 80+
Age
Cyprus
0.0
0.2
0.4
0.6
0.8
1.0
1.2
0 10 20 30 40 50 60 70 80+
Age
Estonia
0.0
0.2
0.4
0.6
0.8
1.0
1.2
0 10 20 30 40 50 60 70 80+
Age
Ireland
0.0
0.2
0.4
0.6
0.8
1.0
1.2
0 10 20 30 40 50 60 70 80+
Age
Sweden
ge
Income Naves Income Immigrants
Consumpon Naves Consumpon Immigrants
Fig. 2. Labour Income and Consumption age profiles for immigrants and natives in the EU countries, 2010. Sources: EU-SILC, 2011; HBS, 2010;
Eurostat database; various other sources and authors' own calculations.
ECONOMIC AND BUSINESS REVIEW 2022;24:36e51 45
turns to be greater than of the natives at age 61 and
over. The big difference between immigrants and
natives in Cyprus can be explained by the striking
increase in the immigration flows in the last 15e20
years. The immigrants coming from new EU mem-
ber states and other third countries nationals are
employed in the low pay industries or are engaged
in domestic work (Gregoriou et al., 2010). In
contrast, the reason for higher labour income of
immigrants than natives in old age is not so clear.
Notwithstanding the relatively loose minimum
required working years, it seems that immigrants
represented at these ages tend to work longer (Eu-
ropean Commission, 2018). Finally, immigrants in
Ireland achieve the same age-specific labour income
as natives at the age of 51 and receive even higher
labour income in some older ages. That corresponds
to the structure of immigrants in Ireland, where
high skilled immigrants from developed countries
prevail. Nevertheless, some puzzles remain un-
solved. The results can also be cohort driven, since
Ireland only in 2000s turned to be an immigration
instead of emigration country (OECD, 2012b).
3.2.2 Consumption
The consumption consists of public and private
consumption, each of the categories disaggregated
to 1) education, 2) health and 3) other consumption.
There is a general pattern in all analysed countries
for both immigrants and natives, that the con-
sumption is greater in the young and old ages
compared to the working age, due to the public
education and health services. Private and public
consumption of the working-age population is
relatively stable for both groups of individuals.
However, the level of consumption age profile of
the immigrants for all five countries strictly differs
from the natives during the working age period. In
that age period, the consumption of immigrants is
lower than the consumption of natives, because of
the lower private consumption other than health
and education, which is expected, given the lower
labour income and therefore fewer resources avail-
able. In most of the countries, the inequality be-
tween the immigrants' and natives’ consumption is
greater at the beginning of the working age period
(which often corresponds with the first years of their
arrival) when immigrants face difficulties entering
the labour market (Barigozzi & Speciale, 2011;
Dustmann et al., 2017).
In Belgium and Estonia, the consumption of im-
migrants is lower than of the natives also during the
old age, but this is not the case in other three
countries. In Sweden, the consumption of immi-
grants and natives is almost the same,2 resulting
from considerably high public consumption. On the
other hand, the private “other consumption” is the
main reason for the higher consumption of immi-
grants than natives at old ages in Ireland and
Cyprus. This seems to correspond with the higher
asset income of immigrants in the old ages in these
countries, as presented below.
3.2.3 Life cycle surplus and economic independency
By calculating the difference between the pre-
sented age profiles of labour income and con-
sumption, we derive the age profile of life cycle
surplus (LCS). Table 2 reveals that in all observed
countries, immigrants are self-supported (through
their labour income) for a shorter age span than
natives. The age period of economic independence
for these five countries combined (unweighted
average) is 30 years for immigrants and 34 years for
natives.
Immigrants in Belgium and Estonia face larger
difference in labour income compared to natives,
which is to a lesser extent offset by lower con-
sumption. In these two countries, immigrants
experience the shortest period of economic inde-
pendency compared to natives; the labour income of
immigrants becomes greater than their consump-
tion 5 (Belgium) and 2 (Estonia) years later than that
of natives, whereas at higher ages immigrants
become dependent again 2 and 5 years sooner than
natives, respectively. On the other hand, in Cyprus,
Ireland and Sweden the economic independence
period of immigrants is shorter by about 2 years
compared to natives and is a result of the later start
of their economic independence period. This cor-
responds with the statistical data on high unem-
ployment rates among young who recently
immigrated and their more volatile employment
compared to the immigrants who have been longer
in a country (OECD, 2016).
Furthermore, the ‘LCS immigration gap’ indica-
tor reveals a considerably lower life cycle surplus
of immigrants, expressed as a relative difference in
the size of the economic independence between
immigrants and natives. This difference in LCS
between immigrants and natives relative to LCS
ofnatives also provides meaningful compar-
isonamong the countries, eliminating country dif-
ferences in the level of wages, prices, etc. We
argue that this indicator can assess the level of
2 Note that we were not able to distinguish between public health consumption of immigrants and natives.
46 ECONOMIC AND BUSINESS REVIEW 2022;24:36e51
integration of immigrants in a country from the
standpoint of the destination country. The
more the immigrants are self-sustainable either
by achieving reasonable (more similar to natives)
labour outcomes and/or by adjusted consumption,
the lower is the probability of the fiscal burden
of immigrants for the destination country. The re-
sults show very high difference in the size of
the economic independence between immigrants
and natives in Belgium, Cyprus and Estonia where
the LCS of immigrants is lower by more than 58%
than the LCS of natives. The LCS immigration
gaps for Belgium and Estonia confirm the results of
the previous indicator that revealed the biggest
difference in the length of the independence
period between immigrants and natives in these
two countries out of all analysed countries.
Conversely, the LCS immigration gap for Cyprus is
the largest, placing this country at the worst place
in our ranking for integration, despite the rela-
tively small difference in the independency span
between immigrants and natives. Nevertheless, the
given rank is in line with the Mipex3 ranking scale
and reflects the inexistence or the very limited
integration policies and bad conditions for the
majority of immigrants in Cyprus (Trimikliniotis &
Demetriou, 2011). The relative difference in the
size of the economic independence between im-
migrants and natives is the smallest in Ireland,
followed by Sweden, where the LCS immigration
gap is 23% and 31% (lower LCS of immigrants
relative to LCS of natives), respectively. That seems
to correspond to the rather narrow gap of the
economic independency span of approximately
two years.
3.3 Financing the LCD at older ages
The developed countries face a rapid population
ageing that will be even more pronounced in the
following decades. The researchers, international
institutions and policy makers are concerned with
the impact of population ageing on the sustainabil-
ity of the public systems, especially pensions, health
care and long-term care. However, the impact on
the public sustainability depends on the manner
how the LCD of the elderly is financed. For example,
pay-as-you-go pensions systems will be heavily
influenced by population ageing, whereas the
impact on the funded systems (where each indi-
vidual saves for his/her own pension) will be much
lower.
Financing the old-age deficit varies strongly
across the countries. Interesting regional differences
have been identified worldwide reflecting the
different arrangement of the support systems.
Europe is characterized as a region where the most
important role in old-age economic dependency
financing play the public transfers (Mason & Lee,
2011). Following the approach of Mason and Lee
(2011), Fig. 3 presents the ‘triangle graph’ with three
channels through which elderly (65 years and older)
finance their LCD: public transfers, private transfers
and asset-based reallocations. In particular, each
side of the triangle represents reliance on one of
those three sources. By definition, for each spot in
the triangle (or outside the triangle) the components
sum up to 100%. We present the results separately
for immigrants and natives.
All observed countries, both for immigrants and
natives, are located near the right-hand side of the
triangle, which means they are mainly relying on
Table 2. Immigrants' and natives’ life cycle independency period and size.
Country Life cycle independency period (age) Aggregate life cycle surplus (LCS) Integration ranking
Immigrants Natives Immigrants (units) Natives (units) LCS imm. gap (%) 1e5
Start End Start End (1-best, 5-worst)
Belgium 29 57 24 59 7985 19,238 58 4
Cyprus 32 60 30 60 4655 11,523 60 5
Estonia 27 55 25 60 6142 14,784 58 3
Ireland 30 60 27 59 11,102 14,402 23 1
Sweden 29 64 27 64 14,099 20,342 31 2
Average 29 59 27 60 46
Note: Aggregate LCS of immigrants and natives is expressed in units that are result of multiplication of the number of immigrants/
natives in LCS and their LCS (LCS values are standardly normalised with the average labour income of individuals aged 30e49).
Source: EU-SILC, 2011; HBS, 2010; Eurostat database; various other sources and authors' own calculations.
3 Migrant Integration Policy Index (MIPEX) uses a number of indicators, including labour market integration, long-term residence and family reunifi-
cation rights, political rights, access to nationality, anti-discrimination policies and public opinion. Cyprus has the lowest score out of the analysed countries
in this paper.
ECONOMIC AND BUSINESS REVIEW 2022;24:36e51 47
some combination of assets and public transfers and
to a very limited extent on private family transfers.
In Belgium and Estonia, public transfers are
important for the natives, but they are even more
important for the immigrants. In Cyprus, Ireland
and Sweden, the asset-based reallocations are very
important for immigrants. Despite the minor
contribution of the private transfers in financing the
LCD, in most of the countries, slightly greater reli-
ance on these transfers by immigrants can be
observed. This is in line with the findings that
overall familial support is more exchanged in
immigrant families (Kim et al., 2012), due to the
stronger intergenerational bond in these families, as
opposed to the majority of the population across
Europe (Bordone & de Valk, 2016).
Considering the very low life cycle surplus of im-
migrants in Belgium and Estonia that cannot provide
conditions for savings, it is expected that immigrants
in the old age rely more on public transfers than
natives. Immigrants’ asset income in the old age is
substantially greater than that of natives in Ireland,
Cyprus and Sweden. A further analysis of the asset
income components reveals that the difference
originates from the greater value of capital income of
immigrants. Consequently, the immigrants in these
countries are less dependent on public transfers, and
if we exclude Ireland and Cyprus (due to the previ-
ously mentioned rich cohorts), our data reveal that
immigrants tend to save and invest more than na-
tives in the period of life cycle surplus and rely more
on their own finances than natives in the period of
old age (case of Sweden).
4 Discussion and conclusions
By applying the National Transfer Accounts
(NTA) methodology, we estimate average labour
income and consumption by age for both natives
and immigrants. We use the latest available and
comparable data to identify how the production,
consumption and economic flows across age differ
for immigrants and natives.
The novelty of the NTA approach is in providing
the age distribution of labour income and con-
sumption, which enables new research possibilities.
As a result, we can analyse at which age individuals
face life cycle deficit and how long they are
economically independent, i.e. earn more than they
consume. Moreover, this methodology enables an
analysis of how children and elderly finance the gap
between consumption and labour income through
public transfers, private transfers and asset-based
reallocations. In this study, we present, for the first
time, the NTA results separately for immigrants and
natives. Due to heavy data requirements, this has
been possible only for Belgium, Cyprus, Estonia,
Ireland and Sweden.
The results show that in all countries and almost
at all ages the labour income of immigrants is lower
than of natives. Both immigrants and natives start to
enter the labour market at the same age, but the
labour income of immigrants increases at lower
Fig. 3. Life cycle deficit financing in old age (65þ) for immigrants and natives in 2010. Source: EU-SILC, 2011; HBS, 2010; Eurostat database; various
other sources and authors' own calculations. Note: BE ¼ Belgium, CY¼ Cyprus, EE ¼ Estonia, IE¼ Ireland, SE¼ Sweden.
48 ECONOMIC AND BUSINESS REVIEW 2022;24:36e51
pace and never reaches the maximum level of na-
tives. This is in line with the previous studies on
slow labour market integration in the first years of
residence in the destination country and lower in-
comes of immigrants, especially in the first years of
employment.
Regarding consumption, the results for immi-
grants primarily suggest that private consumption
(other than health and education) is the main
adjustment vehicle to compensate for the lower la-
bour income in the working age. In general, the
results for the age-specific consumption are an
important contribution to the limited literature for
the consumption of immigrants. Nevertheless, the
same or higher consumption of immigrants in few
of the countries in the old age (Sweden, Ireland and
Cyprus) should be subject to further research. Using
the NTA methodology, we were able to allocate to
immigrants and natives all categories of public
consumption except public consumption on health.
Given the data limitation, we assumed the same per
capita public consumption on health for both im-
migrants and natives. However, the needs and ac-
cess to public health consumption might differ,
which is left for the future research.
Due to the lower labour income which is not offset
by lower consumption, immigrants experience
shorter age span of LCS (economic independence
period) and much lower aggregate LCS than natives.
In Cyprus, Ireland and Sweden, the shorter economic
independence period of immigrants of around 2 years
is mainly a result of the later start of their economic
independence period. In contrast, in Belgium and
Estonia the shorter age span of LCS of immigrants
compared to natives is a result of both later start and
earlier endof their independenceperiod, representing
greater differences between these two types of resi-
dents. Also, we introduced an indicator that captures
the relative difference between immigrants' and na-
tives' economic independence level by measuring the
ratio of the difference betweenLCSof immigrants and
natives relative to LCS of natives. The so-called ‘LCS
immigration gap’ reveals a very high difference in the
size of the economic independence between immi-
grants and natives. The LCS of immigrants is lower
than the LCS of natives by 58%e60% in Belgium,
Cyprus and Estonia, 23% in Ireland and 31% in Swe-
den.Weargue that this indicator alongwith the length
of the immigrants' independencyperiod can serve as a
proxy for the level of integration of immigrants from
the standpoint of the destination country and can offer
a tool for comparison across countries. Furthermore,
monitoring these two indicators in a country over time
can signalpolicymakershow (un)successful thenewly
implemented changes are in the measures and pol-
icies for the integration of immigrants.
Finally, based on the obtained results we focus on
how the life cycle deficit in the older age is financed.
Although the elderly in the analysed countries
generally rely on public transfers, in Cyprus, Ireland
and Sweden, immigrants tend to finance the deficit
more extensively through the asset-based realloca-
tions than natives who rely much more on the
public transfers. While in Cyprus and Ireland this
difference might refer to specific cohort character-
istics, in Sweden it suggests that immigrants tend to
save and invest more than natives.
The EU countries, especially those with a constant
flow of immigrants, shall continue with measures for
labour market integration along with the continuous
assessment of their integration policies effectiveness.
Our results show that higher labour income provides
longer and greater life cycle surplus, and in turn
provides higher level of consumption, which is an
important determinant of the individual's well-being.
Further research shall be focused on the saving and
investing behaviour of immigrants, as this study
suggest that this behaviour (apparent in the late
working age and old age) might partly offset the
negative implications of the labour income gap. Both
higher labour income of immigrants and their
greater reliance on asset-based reallocations would
reduce the fiscal pressure of population ageing on
young and future generations.
Acknowledgment
This project has received funding from the
European Union’s Seventh Framework Programme
for Research, Technological Development and
Demonstration under grant agreement 613247 and
from the Slovenian Research Agency [grant number
P5-0128]. This paper uses data from Eurostat, Cross-
sectional EU-SILC UDB, 2011, and HBS, 2010. We
herewith acknowledge data provision for EU-SILC
and HBS by Eurostat and the European Commis-
sion, respectively. We also gratefully acknowledge
the Ageing Working Group and national teams
included for providing us with the data on health
and long-term care expenditures. The responsibility
for all conclusions drawn from the data lies entirely
with the authors.
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