How do immigrants affect local public finances? Evidence from Italian municipalities

We estimate the causal impact of immigration to Italy on local public finances, at the municipality level (Comuni), between 2008 and 2015. We find that, with the arrival of immigrants, total (current plus capital) revenues go up, while total expenditures do not change, giving rise to an increase in the surplus of the municipality (all outcome variables in the paper are defined in per capita terms). We show that, in Italy, immigrants contribute to the broadening of the property tax base. They cause an increase in property tax revenues from "secondary residences", which are often rented out and are subject to property taxation unlike owner-occupied units. On the expenditure side, immigrant inflows lead to greater current spending in total and on garbage collection, local police, cultural programs, and public transportation. Instead, capital expenditure decreases when immigrants arrive.