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Immigration, Legal Status and Fiscal Impact

Author

Listed:
  • Andri Chassamboulli

    (University of Cyprus)

  • Xiangbo Liu

    (Renmin University of China)

Abstract

We develop a general equilibrium model with search frictions in the labor market, wage bargaining and a welfare state, to study the impact of immigrants on the fiscal balance and welfare of natives in the host country. We distinguish immigrants by legal status and account for both their direct fiscal effects, through their tax contributions and transfer receipts, and their indirect fiscal and welfare effects, through their labor-market impact. We calibrate the model to the U.S. economy and find that legal immigrants reduce the tax burden on natives and increase natives' welfare, mainly because their tax contributions greatly exceed the transfers they receive. On the other hand, illegal immigrants' positive welfare impact stems mainly from their positive effect on job creation, which increases income to natives and in turn consumption. A legalization program leads to a fiscal gain, increases natives' welfare and is more beneficial to natives than a purely restrictive immigration policy that reduces the illegal immigrant population. (Copyright: Elsevier)

Suggested Citation

  • Andri Chassamboulli & Xiangbo Liu, 2024. "Immigration, Legal Status and Fiscal Impact," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 54, October.
    • Handle: RePEc:red:issued:23-48
    DOI: 10.1016/j.red.2024.101238
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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. 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.
    2. 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
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)

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