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Do Immigrants Bring Fiscal Dividends?: The Case of Venezuelan Immigration in Colombia

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  • Valencia, Oscar
  • Angarita, Matilde
  • Santaella, Juan
  • De Castro, Marcela

Abstract

This paper analyzes the effects of recent Venezuelan immigration to Colombia on the fiscal balance, the labor market, and economic growth. For this purpose, we built a dynamic general equilibrium model with a search and matching structure in the labor market. The higher fiscal spending to address immigration negatively impacts the government's budget in the short term, which is offset by higher output, consumption, and employment level, increasing the government's revenues mainly through indirect tax collection. The effect on the labor market is different for unskilled workers--whose higher supply generates a negative effect on wages and an increase in the unemployment rate--and skilled workers, who benefit from higher wages and lower unemployment. These changes in the labor market affect the government's revenue, resulting, in the long term, in positive fiscal dividends of migration.

Suggested Citation

  • Valencia, Oscar & Angarita, Matilde & Santaella, Juan & De Castro, Marcela, 2020. "Do Immigrants Bring Fiscal Dividends?: The Case of Venezuelan Immigration in Colombia," IDB Publications (Working Papers) 10958, Inter-American Development Bank.
    • Handle: RePEc:idb:brikps:10958
    DOI: http://dx.doi.org/10.18235/0002993
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    Cited by:

    1. Franz Hamann & Cesar Anzola & Oscar Avila-Montealegre & Juan Carlos Castro-Fernandez & Anderson Grajales-Olarte & Alexander Guarín & Juan C Mendez-Vizcaino & Juan J. Ospina-Tejeiro & Mario A. Ramos-Ve, 2021. "Monetary Policy Response to a Migration Shock: An Analysis for a Small Open Economy," Borradores de Economia 1153, Banco de la Republica de Colombia.

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    More about this item

    Keywords

    Fiscal policy; Migration; labor market; Unemployment;
    All these keywords.

    JEL classification:

    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers

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