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Assessing the Fiscal Costs and Benefits of A8 Migration to the UK

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  • Christian Dustmann
  • Tommaso Frattini
  • Caroline Halls

Abstract

This paper assesses the fiscal consequences of migration to the UK from the Central and Eastern European countries that joined the EU in May 2004 (A8 countries). We show that A8 immigrants who arrived after EU enlargement in 2004, and who have at least one year of residence - and are therefore legally eligible to claim benefits - are 60% less likely than natives to receive state benefits or tax credits, and 58% less likely to live in social housing. Even if A8 immigrants had the same demographic characteristics of natives, they would still be 13% less likely to receive benefits and 28% less likely to live in social housing. We then compare the net fiscal contribution of A8 immigrants with that of individuals born in the UK, and find that in each fiscal year since enlargement in 2004, A8 immigrants made a positive contribution to public finance despite the fact that the UK has been running a budget deficit over the last years. This is because they have a higher labour force participation rate, pay proportionately more in indirect taxes, and make much lower use of benefits and public services.

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Bibliographic Info

Article provided by Institute for Fiscal Studies in its journal Fiscal Studies.

Volume (Year): 31 (2010)
Issue (Month): 1 (03)
Pages: 1-41

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Handle: RePEc:ifs:fistud:v:31:y:2010:i:1:p:1-41

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References

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  1. Stephen Nickell & Jumana Saleheen, 2009. "The impact of immigration on occupational wages: evidence from Britain," LSE Research Online Documents on Economics 33272, London School of Economics and Political Science, LSE Library.
  2. Storesletten, Kjetil, 1998. "Sustaining Fiscal Policy Through Immigration," Seminar Papers 664, Stockholm University, Institute for International Economic Studies.
  3. DavidG. Blanchflower & Chris Shadforth, 2009. "Fear, Unemployment and Migration," Economic Journal, Royal Economic Society, vol. 119(535), pages F136-F182, 02.
  4. George J. Borjas & Lynette Hilton, 1995. "Immigration and the Welfare State: Immigrant Participation in Means- Tested Entitlement Programs," NBER Working Papers 5372, National Bureau of Economic Research, Inc.
  5. Alan Barrett & Yvonne McCarthy, 2008. "Immigrants and welfare programmes: exploring the interactions between immigrant characteristics, immigrant welfare dependence, and welfare policy," Oxford Review of Economic Policy, Oxford University Press, vol. 24(3), pages 543-560, Autumn.
  6. Barrett, Alan & Duffy, David, 2007. "Are Ireland’s Immigrants Integrating into its Labour Market?," IZA Discussion Papers 2838, Institute for the Study of Labor (IZA).
  7. Christian Dustmann & Tommaso Frattini & Ian Preston, 2008. "The Effect of Immigration along the Distribution of Wages," CReAM Discussion Paper Series 0803, Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London.
  8. Drinkwater, Stephen & Eade, John & Garapich, Michal, 2006. "Poles Apart? EU Enlargement and the Labour Market Outcomes of Immigrants in the UK," IZA Discussion Papers 2410, Institute for the Study of Labor (IZA).
  9. Barrett, Alan & McCarthy, Yvonne, 2006. "Immigrants in a Booming Economy: Analysing their Earnings and Welfare Dependence," IZA Discussion Papers 2457, Institute for the Study of Labor (IZA).
  10. Marco Manacorda & Alan Manning & Jonathan Wadsworth, 2006. "The impact of immigration on the structure of male wages: theory and evidence from Britain," LSE Research Online Documents on Economics 19797, London School of Economics and Political Science, LSE Library.
  11. Lemos, Sara & Portes, Jonathan, 2008. "New Labour? The Impact of Migration from Central and Eastern European Countries on the UK Labour Market," IZA Discussion Papers 3756, Institute for the Study of Labor (IZA).
  12. George J. Borjas & Stephen J. Trejo, 1991. "Immigrant Participation in the Welfare System," NBER Working Papers 3423, National Bureau of Economic Research, Inc.
  13. Robert Rowthorn, 2008. "The fiscal impact of immigration on the advanced economies," Oxford Review of Economic Policy, Oxford University Press, vol. 24(3), pages 561-581, Autumn.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Immigration & irrationalism
    by chris dillow in Stumbling and Mumbling on 2013-03-26 14:26:19
  2. The immigration curve
    by ? in Stumbling and Mumbling on 2014-01-14 14:08:00
  3. Libre circulación en la UE: tan justa como siempre, más necesaria que nunca
    by Juan de Ortega in Politikon on 2014-02-17 07:55:32
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