Comment on Sheetal K. Chand and Martin Paldam

In the era of globalization, the model of the Nordic welfare states, which provide generous social amenities in exchange for high taxes, has come under pressure. It is disputed whether previous public transfer levels can be maintained when emerging low-tax and/or low-wage countries offer ample opportunities for investors of mobile capital. Against this background, mobility of labor has also become a matter of concern. The notion has developed that immigrants attracted by social redistribution are a burden for the host country and thus pose an additional threat to the welfare state. It appears that the new skepticism about the economic impact of immigration is a response to the relatively large immigration flows that have occurred over the last fifteen years. Figure 1 shows that net immigration into the Nordic countries has ranged above the long-term average since the fall of the iron curtain. Immigration rates now seem closer to those in traditional immigration countries like the United States. As a result, for example, the total population of foreign origin in Denmark more than tripled over the few years from 1987 to 2003. More importantly, the composition of immigrants has changed, as the share of refugees and asylum seekers from non-Western countries has risen substantially. Though Denmark tightened legal provisions in response to the historical peak of population growth from immigration in 1995, the country has still absorbed more asylum seekers per capita in recent years than, for example, Germany.