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Immigrant Voters, Taxation and the Size of the Welfare State

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  • Chevalier, Arnaud

    (Royal Holloway, University of London)

  • Elsner, Benjamin

    (University College Dublin)

  • Lichter, Andreas

    (Heinrich Heine University Düsseldorf)

  • Pestel, Nico

    (ROA, Maastricht University)

Abstract

This paper studies the impact of immigration on public policy setting. As a natural experiment, we exploit the sudden arrival of eight million forced migrants in West Germany after World War II. These migrants were on average poorer than the West German population, but unlike most international migrants they had full voting rights and were eligible for social welfare. Using panel data for West German cities and applying difference-in-differences and an instrumental variables approach, we show that local governments responded to this migration shock with selective and persistent tax raises as well as shifts in spending. In response to the inflow, farm and business owners were taxed more while residential property and wage bill taxes were left unchanged. Moreover, high-inflow cities significantly raised welfare spending while reducing spending on infrastructure and housing. Election data suggest that these policy changes were partly driven by the political influence of the immigrants: in high-inflow regions, the major parties were more likely to nominate immigrants as candidates, and a pro-immigrant party received high vote shares. We further document that this episode of mass immigration had lasting effects on people's preferences for redistribution. In areas with larger inflows in the 1940s, people have substantially higher demand for redistribution more than 50 years later.

Suggested Citation

  • Chevalier, Arnaud & Elsner, Benjamin & Lichter, Andreas & Pestel, Nico, 2018. "Immigrant Voters, Taxation and the Size of the Welfare State," IZA Discussion Papers 11725, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp11725
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    Cited by:

    1. Simone Moriconi & Giovanni Peri & Riccardo Turati, 2022. "Are Immigrants more Left leaning than Natives?," NBER Working Papers 30523, National Bureau of Economic Research, Inc.
    2. Rozo, Sandra V. & Vargas, Juan F., 2021. "Brothers or invaders? How crisis-driven migrants shape voting behavior," Journal of Development Economics, Elsevier, vol. 150(C).
    3. Alberto Alesina & Stefanie Stantcheva, 2020. "Diversity, Immigration, and Redistribution," AEA Papers and Proceedings, American Economic Association, vol. 110, pages 329-334, May.
    4. Rostislav Staněk & Ondřej Krčál & Štěpán Mikula, 2021. "Social Capital and Mobility: An Experimental Study," MUNI ECON Working Papers 2021-12, Masaryk University.
    5. Giuranno Michele G. & Biswas Rongili, 2019. "Internal Migration and Public Policy," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 19(4), pages 1-16, October.
    6. Lustenhouwer, Joep & Makarewicz, Tomasz & Peña, Juan Carlos & Proaño Acosta, Christian, 2021. "Are some people more equal than others? Experimental evidence on group identity and income inequality," BERG Working Paper Series 168, Bamberg University, Bamberg Economic Research Group.
    7. Becker, Sascha O. & Ferrara, Andreas, 2019. "Consequences of forced migration: A survey of recent findings," Labour Economics, Elsevier, vol. 59(C), pages 1-16.
    8. Alberto Alesina & Armando Miano & Stefanie Stantcheva, 2020. "The Polarization of Reality," AEA Papers and Proceedings, American Economic Association, vol. 110, pages 324-328, May.
    9. Braun, Sebastian T. & Dwenger, Nadja, 2020. "Settlement location shapes the integration of forced migrants: Evidence from post-war Germany⁎," Explorations in Economic History, Elsevier, vol. 77(C).
    10. Braun, Sebastian Till & Weber, Henning, 2021. "How do regional labor markets adjust to immigration? A dynamic analysis for post-war Germany," Journal of International Economics, Elsevier, vol. 129(C).
    11. Dowon Kim & Dongwon Lee, 2021. "Immigration and the pattern of public spending: evidence from OECD countries," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 28(4), pages 1014-1034, August.
    12. Salvador Traettino, 2022. "Migración forzada y finanzas públicas locales: Evidencia de los municipios en Colombia," Documentos CEDE 020335, Universidad de los Andes – Facultad de Economía – CEDE.
    13. Moriconi, Simone & Peri, Giovanni & Turati, Riccardo, 2019. "Immigration and voting for redistribution: Evidence from European elections," Labour Economics, Elsevier, vol. 61(C).

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    More about this item

    Keywords

    migration; taxation; spending; welfare state;
    All these keywords.

    JEL classification:

    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General

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