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Immigration, Legal Status and Fiscal Impact

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  • Andri Chassamboulli
  • Xiangbo Liu

Abstract

How do legal and illegal immigrants affect the fiscal balance and welfare of natives in the host country? To answer this question we develop a general equilibrium model with search frictions in the labor market that accounts for both the direct net contribution of immigrants to the fiscal balance and their indirect fiscal effects through their labor market impact. We calibrate the model to the US economy and find that legal immigrants increase native welfare, mainly due to their positive direct net contribution to the fiscal balance. On the other hand, illegal immigrants' positive welfare impact stems mainly from their positive effect on job creation, which helps improve the fiscal balance, but also increases income to natives and in turn consumption. A legalization program leads to a fiscal gain and increases native welfare and it is more beneficial to the host country's citizens than a purely restrictive immigration policy that reduces the illegal immigrant population.

Suggested Citation

  • Andri Chassamboulli & Xiangbo Liu, 2020. "Immigration, Legal Status and Fiscal Impact," University of Cyprus Working Papers in Economics 07-2020, University of Cyprus Department of Economics.
    • Handle: RePEc:ucy:cypeua:07-2020
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    References listed on IDEAS

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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Immigration, Legal Status and Fiscal Impact
      by Christian Zimmermann in NEP-DGE blog on 2020-07-22 15:27:35

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    Cited by:

    1. Olivier Charlot & Claire Naiditch & Radu Vranceanu, 2024. "Smuggling of forced migrants to Europe: a matching model," Journal of Population Economics, Springer;European Society for Population Economics, vol. 37(1), pages 1-29, March.
    2. Mayda, Anna Maria & Senses, Mine & Steingress, Walter, 2023. "Immigration and Provision of Public Goods: Evidence at the Local Level in the US," CEPR Discussion Papers 18054, C.E.P.R. Discussion Papers.
    3. Chassamboulli, Andri & Fontaine, Idriss & Gálvez-Iniesta, Ismael & Gomes, Pedro, 2024. "Immigration and labour market flows," Labour Economics, Elsevier, vol. 86(C).

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    More about this item

    Keywords

    Immigration; Search Frictions; Fiscal Impact; Welfare; Job creation; Immigration Policies;
    All these keywords.

    JEL classification:

    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration

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