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Welfare Leakage and Immigration Policy

Author

Listed:
  • Giovanni Facchini
  • Assaf Razin
  • Gerald Willmann

Abstract

This paper analyzes the interaction between the welfare state and immigration policy. We establish a negative relationship between the number of dependents and the extent of the welfare state due to the leakage of benefits. We also explain the determination of immigration policy as the outcome of a lobbying game between domestic interest groups and the government. Our results indicate that there is evidence for welfare leakage and for lobbying as a determinant of immigration policy. In our baseline specification, a 10 percentage points increase in the share of dependents leads to a 7–10 percentage point decrease in the labor tax rate. Furthermore, an increase by 10 percentage points in union density leads to a decrease of one percentage point in the share of immigrants in the population. In the context of EU enlargement and the ensuing migration flows, our model predicts a reduction in the size of the welfare state in the old member countries. (JEL H5, J1, J61)

Suggested Citation

  • Giovanni Facchini & Assaf Razin & Gerald Willmann, 2004. "Welfare Leakage and Immigration Policy," CESifo Economic Studies, CESifo Group, vol. 50(4), pages 627-645.
    • Handle: RePEc:oup:cesifo:v:50:y:2004:i:4:p:627-645.
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    File URL: http://hdl.handle.net/10.1093/cesifo/50.4.627
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    Citations

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    Cited by:

    1. Assaf Razin, 2013. "MIGRATION into the WELFARE STATE: tax and migration competition," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 20(4), pages 548-563, August.
    2. Razin, Assaf & Schwemmer, Alexander, 2020. "Ageing-Driven Migration and Redistribution: Comparing Policy Regimes," CEPR Discussion Papers 14574, C.E.P.R. Discussion Papers.
    3. Alessandra Casarico & Giovanni Facchini & Tommaso Frattini, 2012. "Spending more is spending less: on the desirability of enforcing migration," Norface Discussion Paper Series 2012006, Norface Research Programme on Migration, Department of Economics, University College London.
    4. Russo, Giuseppe & Salsano, Francesco, 2019. "Electoral systems and immigration," European Journal of Political Economy, Elsevier, vol. 60(C).
    5. Cohen, Alon, 2014. "Independent judicial review: A blessing in disguise," International Review of Law and Economics, Elsevier, vol. 37(C), pages 209-220.
    6. Casarico, Alessandra & Facchini, Giovanni & Frattini, Tommaso, 2018. "What drives the legalization of immigrants? Evidence from IRCA," Regional Science and Urban Economics, Elsevier, vol. 70(C), pages 258-273.
    7. Benjamin Powell, 2012. "Coyote ugly: the deadweight cost of rent seeking for immigration policy," Public Choice, Springer, vol. 150(1), pages 195-208, January.
    8. Alessandra Casarico & Giovanni Facchini & Tommaso Frattini, 2012. "Spending More is Spending Less: Policy Dilemmas on Irregular Migration," Development Working Papers 330, Centro Studi Luca d'Agliano, University of Milano, revised 27 Mar 2012.
    9. Assaf Razin & Alon Cohen, 2009. "International migration and the generosity of the welfare state: free vs policy-controlled migration," 2009 Meeting Papers 200, Society for Economic Dynamics.
    10. Alessandra Casarico & Giovanni Facchini & Tommaso Frattini, 2012. "What Drives Immigration Amnesties?," CESifo Working Paper Series 3981, CESifo.
    11. René Böheim & Karin Mayr, 2005. "Immigration and public spending," Economics working papers 2005-12, Department of Economics, Johannes Kepler University Linz, Austria.
    12. Alon Cohen & Assaf Razin, 2008. "The Skill Composition of Immigrants and the Generosity of the Welfare State: Free vs. Policy-Controlled Migration," NBER Working Papers 14459, National Bureau of Economic Research, Inc.
    13. Karin Mayr, 2006. "Optimal budget deficits and immigration," Economics working papers 2006-19, Department of Economics, Johannes Kepler University Linz, Austria.

    More about this item

    JEL classification:

    • H5 - Public Economics - - National Government Expenditures and Related Policies
    • J1 - Labor and Demographic Economics - - Demographic Economics
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers

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