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Fiscal Costs and Benefits of High Skilled Immigration to a Generous Welfare State

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  • Sofie Bødker

    (University of Copenhagen and CEBR)

  • Rasmus Højbjerg Jacobsen

    (CEBR, Copenhagen Business School)

  • Jan Rose Skaksen

    ()
    (Economics Department, Copenhagen Business School, CEBR, IZA and CReAM)

Abstract

We consider the fiscal impact of work related high skilled immigration to a generous welfare state. In a simple theoretical model, we show that, even though a generous welfare state tends to attract immigrants with a high demand for public services, the high skilled immigrants may still be selected among individuals with a relatively low demand of public services. In the empirical analysis we apply a unique Danish data set containing very detailed information on all residents in Denmark, including information on migration. Denmark is interesting, because it has one of the most generous welfare states in the world, and, in spite of that, it turns out that high skilled immigration gives rise to a big net fiscal surplus. Further, high skilled immigrants seem to be selected among those having a relatively low demand of public services.

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Bibliographic Info

Paper provided by Norface Research Programme on Migration, Department of Economics, University College London in its series Norface Discussion Paper Series with number 2013006.

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Date of creation: Feb 2013
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Handle: RePEc:nor:wpaper:2013006

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  1. Dustmann, Christian & Fadlon, Itzhak & Weiss, Yoram, 2011. "Return migration, human capital accumulation and the brain drain," Journal of Development Economics, Elsevier, vol. 95(1), pages 58-67, May.
  2. McDonald, James Ted & Kennedy, Steven, 2004. "Insights into the 'healthy immigrant effect': health status and health service use of immigrants to Canada," Social Science & Medicine, Elsevier, vol. 59(8), pages 1613-1627, October.
  3. David Card, 1996. "Immigrant Inflows, Native Outflows, and the Local Labor Market Impacts of Higher Immigration," Working Papers 747, Princeton University, Department of Economics, Industrial Relations Section..
  4. Steven Kennedy & James Ted McDonald & Nicholas Biddle, 2006. "The Healthy Immigrant Effect and Immigrant Selection: Evidence from Four Countries," Social and Economic Dimensions of an Aging Population Research Papers 164, McMaster University.
  5. Malchow-Møller, Nikolaj & Munch, Jakob R. & Skaksen, Jan Rose, 2009. "Do Immigrants Take the Jobs of Native Workers?," IZA Discussion Papers 4111, Institute for the Study of Labor (IZA).
  6. George J. Borjas, 1988. "Self-Selection and the Earnings of Immigrants," NBER Working Papers 2248, National Bureau of Economic Research, Inc.
  7. George J. Borjas & Bernt Bratsberg, 1994. "Who Leaves? The Outmigration of the Foreign-Born," NBER Working Papers 4913, National Bureau of Economic Research, Inc.
  8. Kjetil Storesletten, . "Sustaining Fiscal Policy Through Immigration," Homapage Papers _005, Stockholm University, Institute for International Economic Studies.
  9. George J. Borjas & Richard B. Friedman & Lawrence F. Katz, 1997. "How Much Do Immigration and Trade Affect Labor Market Outcomes?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(1), pages 1-90.
  10. Borjas, George J, 1999. "Immigration and Welfare Magnets," Journal of Labor Economics, University of Chicago Press, vol. 17(4), pages 607-37, October.
  11. 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.
  12. Christian Dustmann & Tommaso Frattini & Caroline Halls, 2010. "Assessing the Fiscal Costs and Benefits of A8 Migration to the UK," Fiscal Studies, Institute for Fiscal Studies, vol. 31(1), pages 1-41, 03.
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