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Immigration and Public Spending

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Author Info
René Böheim () (University of Linz and IZA Bonn)
Karin Mayr () (University of Linz)

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Abstract

We examine the effect of immigration on public spending from a theoretical (political economic) and an empirical perspective. We distinguish between public spending on private goods and on public goods. Our model implies that whether immigration increases or decreases public spending primarily depends on native’s preferences for private versus public good spending. We empirically test our theoretical hypotheses, the ‘fiscal effect’ and the ‘anti-social effect’ of immigration using OECD panel data for 1990 – 2001. Estimating a system of simultaneous equations for total public spending and the share of spending on private goods, we find evidence for a negative effect of low-skilled immigration on public spending which is attributable to an anti-social effect. The effect of high-skilled immigration on public spending is positive, as suggested by a fiscal effect.

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Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1834.

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Length: 27 pages
Date of creation: Nov 2005
Date of revision:
Handle: RePEc:iza:izadps:dp1834

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Related research
Keywords: immigration; cash transfers; public goods;

Other versions of this item:

Find related papers by JEL classification:
F2 - International Economics - - International Factor Movements and International Business
H4 - Public Economics - - Publicly Provided Goods
H5 - Public Economics - - National Government Expenditures and Related Policies

This paper has been announced in the following NEP Reports:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Erzo F. P. Luttmer, 2001. "Group Loyalty and the Taste for Redistribution," Journal of Political Economy, University of Chicago Press, vol. 109(3), pages 500-528, June. [Downloadable!] (restricted)
    Other versions:
  2. Borjas, George J, 1999. "Immigration and Welfare Magnets," Journal of Labor Economics, University of Chicago Press, vol. 17(4), pages 607-37, October. [Downloadable!] (restricted)
    Other versions:
  3. Orr, Larry L, 1976. "Income Transfers as a Public Good: An Application to AFDC," American Economic Review, American Economic Association, vol. 66(3), pages 359-71, June. [Downloadable!] (restricted)
  4. Ribar, David C & Wilhelm, Mark O, 1996. "Welfare Generosity: The Importance of Administrative Efficiency, Community Values, and Genuine Benevolence," Applied Economics, Taylor and Francis Journals, vol. 28(8), pages 1045-54, August. [Downloadable!] (restricted)
    Other versions:
  5. Madeline Zavodny, 1997. "Welfare and the locational choices of new immigrants," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, issue Q II, pages 2-10. [Downloadable!]
  6. Phillip Swagel & Efraim Sadka & Assaf Razin, 2002. "The Aging of the Population and the Size of the Welfare State," IMF Working Papers 02/68, International Monetary Fund. [Downloadable!]
  7. James M. Poterba, 1996. "Demographic Structure and the Political Economy of Public Education," NBER Working Papers 5677, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  8. Razin, Assaf & Sadka, Efraim & Swagel, Phillip, 2002. "Tax burden and migration: a political economy theory and evidence," Journal of Public Economics, Elsevier, vol. 85(2), pages 167-190, August. [Downloadable!] (restricted)
    Other versions:
  9. Cremer, Helmuth & Pestieau, Pierre, 2004. "Factor mobility and redistribution," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 57, pages 2529-2560 Elsevier. [Downloadable!] (restricted)
  10. Alesina, Alberto & Baqir, Reza & Easterly, William, 1999. "Public goods and ethnic divisions," Policy Research Working Paper Series 2108, The World Bank. [Downloadable!]
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  11. Dani Rodrik, 1998. "Why Do More Open Economies Have Bigger Governments?," Journal of Political Economy, University of Chicago Press, vol. 106(5), pages 997-1032, October. [Downloadable!] (restricted)
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  12. Deininger, Klaus & Squire, Lyn, 1996. "A New Data Set Measuring Income Inequality," World Bank Economic Review, Oxford University Press, vol. 10(3), pages 565-91, September.
  13. Assaf Razin & Efraim Sadka & Phillip Swagel, 2002. "The Aging Population and the Size of the Welfare State," Journal of Political Economy, University of Chicago Press, vol. 110(4), pages 900-918, August. [Downloadable!] (restricted)
    Other versions:
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Karin Mayr, 2006. "Optimal budget deficits and immigration," Economics working papers 2006-19, Department of Economics, Johannes Kepler University Linz, Austria. [Downloadable!]
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