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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)

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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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Publisher 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:200918

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Related research
Keywords: Migration; Fiscal Impact; Welfare state;

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Find related papers by JEL classification:
J61 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Geographic Labor Mobility; Immigrant Workers
H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General

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  1. Alan Barrett & Yvonne McCarthy, 2007. "Immigrants in a Booming Economy: Analysing Their Earnings and Welfare Dependence," LABOUR, CEIS, Fondazione Giacomo Brodolini and Blackwell Publishing Ltd, vol. 21(4-5), pages 789-808, December. [Downloadable!] (restricted)
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  2. DavidG. Blanchflower & Chris Shadforth, 2009. "Fear, Unemployment and Migration," Economic Journal, Royal Economic Society, vol. 119(535), pages F136-F182, 02. [Downloadable!] (restricted)
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  3. 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. [Downloadable!] (restricted)
  4. Stephen Drinkwater & John Eade & Michal Garapich, 2006. "Poles Apart? EU Enlargement and the Labour Market Outcomes of immigrants in the UK," Department of Economics Discussion Papers 1706, Department of Economics, University of Surrey. [Downloadable!]
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  5. Kjetil Storesletten, . "Sustaining Fiscal Policy Through Immigration," Homapage Papers _005, Stockholm University, Institute for International Economic Studies. [Downloadable!]
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  6. 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). [Downloadable!]
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  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. [Downloadable!]
  8. David Card, 2007. "How Immigration Affects U.S. Cities," CReAM Discussion Paper Series 0711, Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London. [Downloadable!]
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