Working Paper: CEPR ID: DP15325
Authors: Mark Colas; Dominik Sachs
Abstract: Low-skilled immigrants indirectly affect public finances through their effect on native wages & labor supply. We operationalize this general-equilibrium effect in the workhorse labor market model with heterogeneous workers and intensive and extensive labor supply margins. We derive a closed-form expression for this effect in terms of estimable statistics. We extend the analysis to various alternative specifications of the labor market and production that have been emphasized in the immigration literature. Empirical quantifications for the U.S. reveal that the indirect fiscal benefit of one low-skilled immigrant lies between $770 and $2,100 annually. The indirect fiscal benefit may outweigh the negative direct fiscal effect that has previously been documented. This challenges the perception of low-skilled immigration as a fiscal burden.
Keywords: immigration; fiscal impact; general equilibrium
JEL Codes: H20; J31; J62; J68
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| low-skilled immigration (K37) | native wages (J15) |
| low-skilled immigration (K37) | labor supply (J20) |
| native wages (J15) | tax payments from high-skilled natives (H29) |
| native wages (J15) | tax payments from low-skilled natives (H29) |
| low-skilled immigration (K37) | indirect fiscal benefit (H29) |
| indirect fiscal benefit (H29) | public finances (H69) |