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Immigration and Public Spending

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  • Böheim, René

    ()
    (University of Linz)

  • Mayr, Karin

    ()
    (University of Vienna)

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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Bibliographic 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: 30 pages
Date of creation: Nov 2005
Date of revision:
Handle: RePEc:iza:izadps:dp1834

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Keywords: public goods; cash transfers; immigration;

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References

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  1. Madeline Zavodny, 1997. "Welfare and the locational choices of new immigrants," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, Federal Reserve Bank of Dallas, issue Q II, pages 2-10.
  2. Dani Rodrik, 1998. "Why Do More Open Economies Have Bigger Governments?," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 106(5), pages 997-1032, October.
  3. Razin, A. & Sadka, E. & Swagel, P., 2000. "The Aging Population and the Size of the Welfare State," Papers, Tel Aviv 2000-23, Tel Aviv.
  4. George J. Borjas, 1998. "Immigration and Welfare Magnets," NBER Working Papers 6813, National Bureau of Economic Research, Inc.
  5. CREMER, Helmuth & PESTIEAU, Pierre, . "Factor mobility and redistribution," CORE Discussion Papers RP, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) -1749, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  6. Razin, A. & Sadka, E. & Swagel, P., 1998. "Tax Burden and Migration: a Political Economy Theory and Evidence," Papers, Tel Aviv 15-98, Tel Aviv.
  7. Deininger, Klaus & Squire, Lyn, 1996. "A New Data Set Measuring Income Inequality," World Bank Economic Review, World Bank Group, World Bank Group, vol. 10(3), pages 565-91, September.
  8. Erzo F.P. Luttmer, 1999. "Group Loyalty and the Taste for Redistribution," JCPR Working Papers, Northwestern University/University of Chicago Joint Center for Poverty Research 61, Northwestern University/University of Chicago Joint Center for Poverty Research.
  9. Alesina, Alberto & Baqir, Reza & Easterly, William, 1999. "Public goods and ethnic divisions," Policy Research Working Paper Series 2108, The World Bank.
  10. Ribar, D.C. & Wilhelm, M.O., 1992. "Welfare Generosity: The Importance of Administrative Efficiency, Community Values and Genuine Benevolence," Papers, Pennsylvania State - Department of Economics 11-92-2, Pennsylvania State - Department of Economics.
  11. James M. Poterba, 1997. "Demographic structure and the political economy of public education," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 16(1), pages 48-66.
  12. Boeri, Tito & Hanson, Gordon H. & McCormick, Barry (ed.), 2002. "Immigration Policy and the Welfare System: A Report for the Fondazione Rodolfo Debenedetti," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780199256310, October.
  13. 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.
  14. Orr, Larry L, 1976. "Income Transfers as a Public Good: An Application to AFDC," American Economic Review, American Economic Association, American Economic Association, vol. 66(3), pages 359-71, June.
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Cited by:
  1. Hunt, Gary L. & Mueller, Richard E., 2010. "Returns to Skill, Tax Policy, and North American Migration by Skill Level: Canada and the United States 1995 - 2001," CLSSRN working papers, Vancouver School of Economics clsrn_admin-2010-11, Vancouver School of Economics, revised 26 Mar 2010.
  2. Giulietti, Corrado & Wahba, Jackline, 2012. "Welfare Migration," IZA Discussion Papers 6450, Institute for the Study of Labor (IZA).
  3. Karin Mayr, 2006. "Optimal budget deficits and immigration," Economics working papers, Department of Economics, Johannes Kepler University Linz, Austria 2006-19, Department of Economics, Johannes Kepler University Linz, Austria.

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