Arbeitspapier

The Fiscal Effect of Immigration: Reducing Bias in Influential Estimates

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.

Language
Englisch

Bibliographic citation
Series: CESifo Working Paper ; No. 9464

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

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

Handle
Last update
10.03.2025, 11:44 AM CET

Data provider

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Object type

  • Arbeitspapier

Associated

  • Clemens, Michael
  • Center for Economic Studies and ifo Institute (CESifo)

Time of origin

  • 2021

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