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Immigration and the pattern of public spending: evidence from OECD countries

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  • Dowon Kim

    (Migration Research & Training Centre)

  • Dongwon Lee

    (Sungkyunkwan University)

Abstract

Using a panel of OECD countries, we show that immigration systematically alters the composition of public spending in the destination country. To mitigate bias from the endogenous sorting of immigrants, we use an IV estimation strategy. The instrument is constructed by estimating a bilateral migration model for 24 destination and 208 source countries. We find that the host country responds to the increase in immigrants by adjusting various expenditures, such as by reallocating resources from social welfare to national defense and public order. Our findings imply that (1) immigration affects policy outcomes in areas with a low ethnic or redistributive dimension and (2) immigration may have an insubstantial effect on the total size of government.

Suggested Citation

  • Dowon Kim & Dongwon Lee, 2021. "Immigration and the pattern of public spending: evidence from OECD countries," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 28(4), pages 1014-1034, August.
    • Handle: RePEc:kap:itaxpf:v:28:y:2021:i:4:d:10.1007_s10797-020-09638-x
    DOI: 10.1007/s10797-020-09638-x
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    Cited by:

    1. Lee, Dongwon & Min, Sujin, 2023. "Participatory budgeting and the pattern of local government spending: Evidence from South Korea," European Journal of Political Economy, Elsevier, vol. 76(C).

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    More about this item

    Keywords

    International migration; Government expenditures; Substitution effect; Bilateral migration model;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General

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