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The fiscal impact of immigration to welfare states of the Scandinavian type

Author

Listed:
  • Marianne Frank Hansen

    (The Danish Rational Economic Agents Model—DREAM)

  • Marie Louise Schultz-Nielsen

    (The Rockwool Foundation Research Unit)

  • Torben Tranæs

    (SFI—The Danish National Centre for Social Research)

Abstract

In this paper, we examine the potential of immigration to strengthen fiscal sustainability, which is under pressure by an ageing population in many European countries. We look at a particularly challenging case, namely that of Denmark, which has extensive tax-financed welfare programmes that provide a high social safety net. The analysis is based on a forecast of the entire Danish economy made using a dynamic computable general equilibrium model with overlapping generations. We present life cycle estimates of the potential fiscal impact of immigration considering the cost of immigration on the margin as well as on average. The main conclusion is that immigrants from Western countries have a positive fiscal impact, while immigrants from non-Western countries have a large negative one, which is also the case when considering only non-refugee immigrants. The negative effect is caused by both a weak labour market performance and early retirement in combination with the universal Danish welfare schemes.

Suggested Citation

  • Marianne Frank Hansen & Marie Louise Schultz-Nielsen & Torben Tranæs, 2017. "The fiscal impact of immigration to welfare states of the Scandinavian type," Journal of Population Economics, Springer;European Society for Population Economics, vol. 30(3), pages 925-952, July.
    • Handle: RePEc:spr:jopoec:v:30:y:2017:i:3:d:10.1007_s00148-017-0636-1
    DOI: 10.1007/s00148-017-0636-1
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    References listed on IDEAS

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    Cited by:

    1. Michael Christl & Alain Bélanger & Alessandra Conte & Jacopo Mazza & Edlira Narazani, 2022. "Projecting the fiscal impact of immigration in the European Union," Fiscal Studies, John Wiley & Sons, vol. 43(4), pages 365-385, December.
    2. Joakim Ruist, 2020. "The fiscal aspect of the refugee crisis," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 27(2), pages 478-492, April.
    3. Nga Hong Nguyen & Trang Thi Thu Nguyen, 2022. "Assuring Social Equity and Improving Income from an Assessment of Government’s Supports in a Pandemic and Migrant Workers’ Integration in Vietnam," Economies, MDPI, vol. 10(4), pages 1-22, April.
    4. James P. Smith, 2018. "Taxpayer effects of immigration," IZA World of Labor, Institute of Labor Economics (IZA), pages 1-11, October.
    5. Michael Christl & Andrea Papini & Alberto Tumino, 2020. "Heterogeneity in effective VAT rates across native and migrant households in France, Germany and Spain," JRC Working Papers on Taxation & Structural Reforms 2020-09, Joint Research Centre.
    6. Carlo V. Fiorio & Tommaso Frattini & Andrea Riganti & Michael Christl, 2024. "Migration and public finances in the EU," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 31(3), pages 635-684, June.
    7. Torben M. Andersen, 2023. "The Danish labor market, 2000–2022," IZA World of Labor, Institute of Labor Economics (IZA), pages 404-404, April.
    8. Camilla Hvidtfeldt & Marie Louise Schultz-Nielsen & Erdal Tekin & Mogens Fosgerau, 2018. "An estimate of the effect of waiting time in the Danish asylum system on post-resettlement employment among refugees: Separating the pure delay effect from the effects of the conditions under which re," PLOS ONE, Public Library of Science, vol. 13(11), pages 1-14, November.
    9. Ndeye Penda Sokhna & Lionel Ragot & Xavier Chojnicki, 2018. "The fiscal impact of 30 years of immigration in France: an accounting approach," EconomiX Working Papers 2018-36, University of Paris Nanterre, EconomiX.
    10. Manthei, Gerrit, 2020. "The effects of refugee immigration on income inequality in Germany: A case study," FZG Discussion Papers 72, University of Freiburg, Research Center for Generational Contracts (FZG).
    11. Peter Haan & Martin Kroh & Kent Troutman, 2017. "Employment and Human Capital Investment Intentions among Recent Refugees in Germany," SOEPpapers on Multidisciplinary Panel Data Research 937, DIW Berlin, The German Socio-Economic Panel (SOEP).
    12. Manthei, Gerrit, 2020. "The long-term growth impact of refugee migration in Europe: A case study," FZG Discussion Papers 71, University of Freiburg, Research Center for Generational Contracts (FZG).
    13. IGARASHI Akira & ONO Yoshikuni, 2020. "The Effects of Negative and Positive Information on Attitudes toward Immigration," Discussion papers 20023, Research Institute of Economy, Trade and Industry (RIETI).
    14. Peter Haan & Martin Kroh & Kent Troutman, 2017. "Employment and Human Capital Investment Intentions among Recent Refugees in Germany," Discussion Papers of DIW Berlin 1692, DIW Berlin, German Institute for Economic Research.

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    More about this item

    Keywords

    Immigration; Sustainable fiscal policy; Welfare benefits;
    All these keywords.

    JEL classification:

    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers

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