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The Impact of Immigrants on Public Finances: A Forecast Analysis for Denmark

Author

Listed:
  • Hansen, Marianne Frank

    (Danish Rational Economic Agents Model (DREAM))

  • Schultz-Nielsen, Marie Louise

    (Rockwool Foundation Research Unit)

  • Tranæs, Torben

    (VIVE - The Danish Centre for Applied Social Science)

Abstract

All over Europe, ageing populations threaten nations' financial sustainability. In this paper we examine the potential of immigration to strengthen financial sustainability. 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 for the entire Danish economy made using a dynamic computable general equilibrium model with overlapping generations. Net contributions to the public purse are presented both as cross-sectional figures for a long time horizon and as average individual life-cycle contributions. The main conclusion is that immigrants from richer countries have a positive fiscal impact, while immigrants from poorer countries have a large negative one. 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

  • Hansen, Marianne Frank & Schultz-Nielsen, Marie Louise & Tranæs, Torben, 2015. "The Impact of Immigrants on Public Finances: A Forecast Analysis for Denmark," IZA Discussion Papers 8844, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp8844
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    References listed on IDEAS

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    1. Christian Dustmann & Tommaso Frattini, 2014. "The Fiscal Effects of Immigration to the UK," Economic Journal, Royal Economic Society, vol. 124(580), pages 593-643, November.
    2. Joakim Ruist, 2014. "Free Immigration and Welfare Access: The Swedish Experience," Fiscal Studies, Institute for Fiscal Studies, vol. 35, pages 19-39, March.
    3. Poul Schou, 2006. "Immigration, integration and fiscal sustainability," Journal of Population Economics, Springer;European Society for Population Economics, vol. 19(4), pages 671-689, October.
    4. Hinte, Holger & Zimmermann, Klaus F., 2014. "Does the Calculation Hold? The Fiscal Balance of Migration to Denmark and Germany," IZA Policy Papers 87, Institute of Labor Economics (IZA).
    5. Wadensjo, Eskil, 2007. "Immigration and net transfers within the public sector in Denmark," European Journal of Political Economy, Elsevier, vol. 23(2), pages 472-485, June.
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    Cited by:

    1. Mikkel Christoffer Barslund & Marten von Werder, 2016. "Measuring dependency ratios using National Transfer Accounts," Vienna Yearbook of Population Research, Vienna Institute of Demography (VID) of the Austrian Academy of Sciences in Vienna, vol. 14(1), pages 155-186.
    2. Torben M. Andersen, 2017. "The Danish labor market, 2000–2016," IZA World of Labor, Institute of Labor Economics (IZA), pages 404-404, November.
    3. Torben M. Andersen & Giuseppe Bertola & John Driffill & Harold James & Hans-Werner Sinn & Jan-Egbert Sturm & Branko Uroševic, 2016. "Chapter 4: Denmark: Too Good to Be True?," EEAG Report on the European Economy, CESifo, vol. 0, pages 85-98, February.
    4. Torben M. Andersen, 2019. "The Danish labor market, 2000–2018," IZA World of Labor, Institute of Labor Economics (IZA), pages 404-404, December.

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    More about this item

    Keywords

    welfare benefits; sustainable fiscal policy; immigration;
    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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