How do Immigrants Affect Local Public Finances? Evidence from Italy

In this paper we estimate the causal impact of immigration to Italy on local public finances, at the municipality level (Comuni), between 2008 and 2015. We make use of administrative data to analyze public revenues and expenditures disaggregated by type. We find that, after the arrival of immigrants, total (current plus capital) revenues increase while total expenditures are not affected, giving rise to an increase in the surplus of the municipality (all outcome variables in the paper are defined in per capita terms). The arrival of immigrants increases current revenues and, in particular, property tax revenues, fees, and other revenues, as well as transfers from other levels of government. We show that there is an increase in property tax revenues from “secondary residences†, which are often rented out and are subject to higher taxation compared to owner-occupied units. On the expenditure side, immigrant inflows lead to greater current spending in total and on various items such as: garbage collection, local police, cultural programs, and public transportation. Capital expenditures decrease instead, when immigrants arrive.