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Assessing the Fiscal Costs and Benefits of A8 Migration to the UK

  • Christian Dustmann
  • Tommaso Frattini
  • Caroline Halls

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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Article provided by Institute for Fiscal Studies in its journal Fiscal Studies.

Volume (Year): 31 (2010)
Issue (Month): 1 (03)
Pages: 1-41

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Handle: RePEc:ifs:fistud:v:31:y:2010:i:1:p:1-41
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  1. Kjetil Storesletten, 2000. "Sustaining Fiscal Policy through Immigration," Journal of Political Economy, University of Chicago Press, vol. 108(2), pages 300-323, April.
  2. Lemos, Sara & Portes, Jonathan, 2008. "New Labour? The Impact of Migration from Central and Eastern European Countries on the UK Labour Market," IZA Discussion Papers 3756, Institute for the Study of Labor (IZA).
  3. Alan Barrett & Yvonne McCarthy, 2008. "Immigrants and welfare programmes: exploring the interactions between immigrant characteristics, immigrant welfare dependence, and welfare policy," Oxford Review of Economic Policy, Oxford University Press, vol. 24(3), pages 543-560, Autumn.
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  7. 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.
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  9. George J. Borjas & Stephen J. Trejo, 1990. "Immigrant Participation in the Welfare System," NBER Working Papers 3423, National Bureau of Economic Research, Inc.
  10. Borjas, George J & Hilton, Lynette, 1996. "Immigration and the Welfare State: Immigrant Participation in Means-Tested Entitlement Programs," The Quarterly Journal of Economics, MIT Press, vol. 111(2), pages 575-604, May.
  11. Alan Barrett & Yvonne McCarthy, 2007. "Immigrants in a Booming Economy: Analysing Their Earnings and Welfare Dependence," LABOUR, CEIS, vol. 21(4-5), pages 789-808, December.
  12. Christian Dustmann & Tommaso Frattini & Ian P. Preston, 2013. "The Effect of Immigration along the Distribution of Wages," Review of Economic Studies, Oxford University Press, vol. 80(1), pages 145-173.
  13. Alan Barrett & David Duffy, 2007. "Are Ireland's Immigrants Integrating into its Labour Market?," Papers WP199, Economic and Social Research Institute (ESRI).
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