The paper outlines a theoretical and empirically tested approach to estimating the net fiscal effect of low skilled migration, beyond simply measuring tax receipts and spending on the migrants themselves. Simply put, you cannot just add up the taxes paid by and benefits paid to the immigrants to determine whether they are net burdens on the taxpayer since their presence in the labor market has equilibrium effects, essentially making natives richer and increasing *their* taxes paid.
Abstract:
> Low-skilled immigrants indirectly affect public finances through their effect on native wages & labor supply. We operationalize this general-equilibrium effect in the workhorse labor market model with heterogeneous workers and intensive and extensive labor supply margins. We derive a closed-form expression for this effect in terms of estimable statistics. We extend the analysis to various alternative specifications of the labor market and production that have been emphasized in the immigration literature. Empirical quantifications for the U.S. reveal that the indirect fiscal benefit of one low-skilled immigrant lies between $770 and $2,100 annually. The indirect fiscal benefit may outweigh the negative direct fiscal effect that has previously been documented. This challenges the perception of low-skilled immigration as a fiscal burden.
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!ping ECON
sorry for pinging this paper again, but I think this is a better place to discuss it
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The paper outlines a theoretical and empirically tested approach to estimating the net fiscal effect of low skilled migration, beyond simply measuring tax receipts and spending on the migrants themselves. Simply put, you cannot just add up the taxes paid by and benefits paid to the immigrants to determine whether they are net burdens on the taxpayer since their presence in the labor market has equilibrium effects, essentially making natives richer and increasing *their* taxes paid.
Abstract:
> Low-skilled immigrants indirectly affect public finances through their effect on native wages & labor supply. We operationalize this general-equilibrium effect in the workhorse labor market model with heterogeneous workers and intensive and extensive labor supply margins. We derive a closed-form expression for this effect in terms of estimable statistics. We extend the analysis to various alternative specifications of the labor market and production that have been emphasized in the immigration literature. Empirical quantifications for the U.S. reveal that the indirect fiscal benefit of one low-skilled immigrant lies between $770 and $2,100 annually. The indirect fiscal benefit may outweigh the negative direct fiscal effect that has previously been documented. This challenges the perception of low-skilled immigration as a fiscal burden.
!ping ECON
sorry for pinging this paper again, but I think this is a better place to discuss it