The Fiscal Effect of Immigration: Reducing Bias in Influential Estimates

Arbeitspapier

Immigration policy can have important net fiscal effects that vary by immigrants’ skill level. But mainstream methods to estimate these effects are problematic. Methods based on cash-flow accounting offer precision at the cost of bias; methods based on general equilibrium modeling address bias with limited precision and transparency. A simple adjustment greatly reduces bias in the most influential and precise estimates: conservatively accounting for capital taxes paid by the employers of immigrant labor. The adjustment is required by firms’ profit-maximizing behavior, unconnected to general equilibrium effects. Adjusted estimates of the positive net fiscal impact of average recent U.S. immigrants rise by a factor of 3.2, with a much shallower education gradient. They are positive even for an average recent immigrant with less than high school education, whose presence causes a present-value subsidy of at least $128,000 to all other taxpayers collectively.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 9464

Classification and Topics

• Classification: Wirtschaft ; International Migration ; Forecasts of Budgets, Deficits, and Debt ; Geographic Labor Mobility; Immigrant Workers
• Subject: immigration ; fiscal ; budget ; budgetary ; tax revenue ; benefits ; taxes ; deficit ; surplus ; gain ; contribution ; welfare ; social security

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Clemens, Michael
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2021

Further information

• Handle: http://hdl.handle.net/10419/249009
• Last update: 10.03.2025, 11:44 AM CET