from soci ~~o-~~ demographic composition changes are relatively smaller for the high ~~-s~~ killed workers. To put it differently, as they become better substitutes for low ~~-s~~ killed workers, the larger number of high ~~-s~~ killed workers now experience smaller losses to their relative wages. In the same vein, the low ~~-s~~ killed workers, both young and old, experience smaller wages gains. Similarly, immigration has (marginally) reduced negative effect on the wages of the high ~~-s~~ killed and on the gains to the low ~~-s~~ killed. These results are again due to the fact that the relatively higher share of the high ~~-s~~ killed workers among the immigrants is now less damaging to the high ~~-s~~ killed natives and less advantageous for their low ~~-s~~ killed counterparts. Changes in the wage effects from emigration are governed by identical mechanisms. When we look at the total effect, changes in age ~~-~~ education composition contribute almost all of it with emigration and immigration canceling each other out. In the second scenario, presented in the third panel of Table 4, we increase the degree of substitutability between age groups by setting 0, = 7. In comparison to the baseline scenario, the young low ~~-s~~ killed workers experience a decline in their wage gains. ‘The substitutability between them and older low ~~-s~~ killed workers increases, which in turn, dampens the gains from large reduction in their stocks. Similarly, the gains for the older low ~~-s~~ killed increases. We see a parallel result for the high ~~-s~~ killed workers. The younger high ~~-s~~ killed workers now lose even more while the losses of the older high ~~-s~~ killed are pared down. Finally, the new scenario leads to little change in the wage effects arising from immigration or emigration, in comparison to the main scenario.

The third scenario makes the immigrants almost perfectly substitutable with natives by setting o,, = 1000. This magnifies the negative wage effects of immigration on the high ~~-~~ skilled workers, but the wage gains to the low ~~-s~~ killed remain fairly stable. The elasticity parameter we have changed has little importance in the slope of the wage responses to changes in the quantity of the native labor force, and the resulting wage effects from ageing and emigration are negligible.

# 5.2. Involuntary unemployment with redistributive benefits

Our next extension changes certain assumptions we made about labor markets and unem ~~-~~ ployment as discussed in section 2.5. Recall that we first introduce involuntary unemploy ~~-~~ ment into the model where we assume workers face exogenous job separation and matching rates. As a result workers spend a certain fraction of their time in unemployment as they search for a new match. The unemployment rates are assumed to be group ~~-s~~ pecific and we obtain these data from DIOC and the OECD shor ~~t-~~ term labour market statistics. Next, we introduce unemployment benefits that are equal to a fraction 6 < 1 of the average wage rate of the economy. We assume all workers receive the same benefits which makes the insurance program redistributive. Insurance leads to the modification of the labor supply function where the average wage incorporates the insurance payment weighted by 25