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Immigration and Public Spending

Author

Listed:
  • Böheim, René

    () (University of Linz)

  • Mayr, Karin

    () (University of Vienna)

Abstract

We examine the effect of immigration on public spending from a theoretical (political economic) and an empirical perspective. We distinguish between public spending on private goods and on public goods. Our model implies that whether immigration increases or decreases public spending primarily depends on native’s preferences for private versus public good spending. We empirically test our theoretical hypotheses, the 'fiscal effect' and the 'anti-social effect' of immigration using OECD panel data for 1990 – 2001. Estimating a system of simultaneous equations for total public spending and the share of spending on private goods, we find evidence for a negative effect of low-skilled immigration on public spending which is attributable to an anti-social effect. The effect of high-skilled immigration on public spending is positive, as suggested by a fiscal effect.

Suggested Citation

  • Böheim, René & Mayr, Karin, 2005. "Immigration and Public Spending," IZA Discussion Papers 1834, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp1834
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    Cited by:

    1. Corrado Giulietti & Jackline Wahba, 2013. "Welfare migration," Chapters,in: International Handbook on the Economics of Migration, chapter 26, pages 489-504 Edward Elgar Publishing.
    2. Nikolaj A. Harmon, 2010. "The End of the European Welfare States? Migration, Ethnic Diversity and Public Goods," Working Papers 1277, Princeton University, Department of Economics, Industrial Relations Section..
    3. Hunt, Gary L. & Mueller, Richard E., 2010. "Returns to Skill, Tax Policy, and North American Migration by Skill Level: Canada and the United States 1995 - 2001," CLSSRN working papers clsrn_admin-2010-11, Vancouver School of Economics, revised 26 Mar 2010.
    4. Karin Mayr, 2006. "Optimal budget deficits and immigration," Economics working papers 2006-19, Department of Economics, Johannes Kepler University Linz, Austria.
    5. repec:pri:indrel:dsp01c247ds102 is not listed on IDEAS
    6. Nikolaj A. Harmon, 2012. "Immigration, Ethnic Diversity and Political Outcomes: Evidence from Denmark," Working Papers 1383, Princeton University, Department of Economics, Industrial Relations Section..

    More about this item

    Keywords

    public goods; cash transfers; immigration;

    JEL classification:

    • F2 - International Economics - - International Factor Movements and International Business
    • H4 - Public Economics - - Publicly Provided Goods
    • H5 - Public Economics - - National Government Expenditures and Related Policies

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