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Immigrant Voters, Taxation and the Size of the Welfare State

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Listed:
  • Arnaud Chevalier
  • Benjamin Elsner
  • Andreas Lichter
  • Nico Pestel

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

  • Arnaud Chevalier & Benjamin Elsner & Andreas Lichter & Nico Pestel, 2018. "Immigrant Voters, Taxation and the Size of the Welfare State," Working Papers 201814, School of Economics, University College Dublin.
  • Handle: RePEc:ucn:wpaper:201814
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    File URL: http://hdl.handle.net/10197/9482
    File Function: First version, 2018
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    References listed on IDEAS

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    Cited by:

    1. Giuranno, Michele G. & Rongili, Biswas, 2012. "Internal migration and public policy," MPRA Paper 94217, University Library of Munich, Germany, revised 23 May 2019.

    More about this item

    Keywords

    Migration; Taxation; Spending; Welfare state;

    JEL classification:

    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies

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