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

  • Christian Dustmann

    ()

    (University College London, CReAM)

  • Tommaso Frattini

    ()

    (University College London, CReAM)

  • Caroline Halls

    (CReAM)

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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Paper provided by Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London in its series CReAM Discussion Paper Series with number 0918.

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Date of creation: Jul 2009
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Handle: RePEc:crm:wpaper:0918
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  1. Stephen Nickell & Jumana Saleheen, 2008. "The impact of immigration on occupational wages: evidence from Britain," Working Papers 08-6, Federal Reserve Bank of Boston.
  2. Barrett, Alan & Duffy, David, 2007. "Are Ireland’s Immigrants Integrating into its Labour Market?," IZA Discussion Papers 2838, Institute for the Study of Labor (IZA).
  3. Marco Manacorda & Alan Manning & Jonathan Wadsworth, 2006. "The Impact of Immigration on the Structure of Male Wages: Theory and Evidence from Britain," CReAM Discussion Paper Series 0608, Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London.
  4. 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.
  5. Kjetil Storesletten, 2000. "Sustaining Fiscal Policy through Immigration," Journal of Political Economy, University of Chicago Press, vol. 108(2), pages 300-323, April.
  6. Barrett, Alan & McCarthy, Yvonne, 2006. "Immigrants in a Booming Economy: Analysing their Earnings and Welfare Dependence," IZA Discussion Papers 2457, Institute for the Study of Labor (IZA).
  7. DavidG. Blanchflower & Chris Shadforth, 2009. "Fear, Unemployment and Migration," Economic Journal, Royal Economic Society, vol. 119(535), pages F136-F182, 02.
  8. 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).
  9. Barrett, Alan & McCarthy, Yvonne, 2008. "Immigrants and Welfare Programmes: Exploring the Interactions between Immigrant Characteristics, Immigrant Welfare Dependence and Welfare Policy," IZA Discussion Papers 3494, Institute for the Study of Labor (IZA).
  10. Christian Dustmann & Tommaso Frattini & Ian Preston, 2008. "The Effect of Immigration along the Distribution of Wages," CReAM Discussion Paper Series 0803, Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London.
  11. George J. Borjas & Stephen J. Trejo, 1990. "Immigrant Participation in the Welfare System," NBER Working Papers 3423, National Bureau of Economic Research, Inc.
  12. Stephen Drinkwater & John Eade & Michal Garapich, 2006. "Poles Apart? EU Enlargement and the Labour Market Outcomes of immigrants in the UK," School of Economics Discussion Papers 1706, School of Economics, University of Surrey.
  13. 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.
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