The Fiscal Impact of Immigrants : Taxes and Benefits

This paper provides a comprehensive look at the different ways of estimating the fiscal impact of immigration, discusses the evidence for different countries and proposes ideas for future research. The evidence regarding the direction of the fiscal impact of immigration (i.e. fiscal burden or blessing) is mixed, but most analysis suggests that the impact is a small share of the fiscal budgets of most host countries. In most cases the estimated impact is less than 1 percent of GDP. The majority of the analysis has been static (i.e. analysis for a single fiscal year), even though there is wide acceptance that a longitudinal perspective is necessary in order to assess the fiscal impact of immigration. The majority of the existing dynamic analyses provide a partial equilibrium perspective which fails to provide a comprehensive picture of this complex topic. There is also broad agreement that the composition of the immigrant population is more important than the level of immigration, but there is scarce research which focuses on the composition question. This includes a lack of research which distinguishes the impact of those who migrated after going through a selection process based on skills (e.g. work visas) and those who arrived through other channels (e.g. free movement, family reunification, asylum, etc.). Finally, a large share of the work in the area has been conducted by think-tanks and other policy focused groups. Most of these organizations have a set agenda in favour or against increased immigration. Unsurprisingly, those organizations with a favourable view of immigration tend to find that immigrants make a positive contribution to public finances, while those campaigning for reduced immigration tend to find the contrary