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

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Author Info

  • Christian Dustmann

    ()
    (University College London, CReAM)

  • Tommaso Frattini

    ()
    (University College London, CReAM)

  • Caroline Halls

    (CReAM)

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

Paper provided by Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London in its series CReAM Discussion Paper Series with number 0918.

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Date of creation: Jul 2009
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Handle: RePEc:crm:wpaper:0918

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Keywords: Migration; Fiscal Impact; Welfare state;

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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. 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).
  3. 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).
  4. 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.
  5. Barrett, Alan & McCarthy, Yvonne, 2008. "Immigrants and Welfare Programmes: Exploring the Interactions between Immigrant Characteristics, Immigrant Welfare Dependence and Welfare Policy," IZA Discussion Papers 3494, Institute for the Study of Labor (IZA).
  6. 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.
  7. George J. Borjas & Stephen J. Trejo, 1991. "Immigrant participation in the welfare system," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 44(2), pages 195-211, January.
  8. Sara Lemos & Jonathan Portes, 2008. "New Labour? The Impact of Migration from Central and Eastern European Countries on the UK Labour Market," Discussion Papers in Economics 08/29, Department of Economics, University of Leicester.
  9. David G. Blanchflower & Chris Shadforth, 2007. "Fear, Unemployment and Migration," NBER Working Papers 13506, National Bureau of Economic Research, Inc.
  10. 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).
  11. Marco Manacorda & Alan Manning & Jonathan Wadsworth, 2006. "The Impact of Immigration on the Structure of Male Wages: Theory and Evidence from Britain," CReAM Discussion Paper Series 0608, Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London.
  12. Borjas, George J & Hilton, Lynette, 1996. "Immigration and the Welfare State: Immigrant Participation in Means-Tested Entitlement Programs," The Quarterly Journal of Economics, MIT Press, vol. 111(2), pages 575-604, May.
  13. Kjetil Storesletten, 2000. "Sustaining Fiscal Policy through Immigration," Journal of Political Economy, University of Chicago Press, vol. 108(2), pages 300-323, April.
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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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