Foreign-born households’ contribution to inequality and polarization in European income distributions

We provide evidence on the relative differences in the disposable incomes of native and foreign-born households in 21 European countries using EU-SILC data for 2008, 2013 and 2018. Using influence function regression, we derive the contribution of foreign-born households to host country indicators of income inequality and polarization. Individuals living in foreign-born households tend to be over-represented in the lower tails of the income distribution. Although there is heterogeneity in the incomes of foreign-born households, their generally disadvantaged positions tend to push national income inequality upward. This pattern persists in many countries, albeit mitigated in magnitude, when we account for the differences in socio-demographic characteristics. The effect on the Foster-Wolfson index of polarization is more mixed, with immigrants in many countries showing no significant contribution to polarization. Using tools adapted from meta-analysis, we find a strong association between welfare regimes and the contribution of immigrant households to inequality and polarization.