Immigration and the Welfare State

Immigration is one of the most contentious issues in our times — on both sides of the Atlantic. Focusing on economic effects, some emphasize the strain that immigrants place on the social welfare system, whereas others stress the contribution to the economy brought about by the newcomers.

A recent study based on Italian data sheds some light on the issue. Based on administrative data from nearly seven thousand communes, the authors estimate per-capita revenues and expenditures connected with each immigrant. The authors track data on income tax, property tax, and other revenue sources; as well as data on education, local police, cultural programs, and other expenses.

The authors find that, between 2008 and 2015, the arrival of immigrants resulted in higher current revenues, while leaving total expenditures nearly unchanged. The increase in revenues is largely accounted for by property taxes.  Specifically, compared to natives, a smaller percentage of migrants are homeowners. Hence, when immigrants arrive, more houses are likely to be rented out and declared by taxpayers as “secondary residences.” And the latter are subject to higher taxation compared to owner-occupied units.

In sum, on a tax and welfare benefits basis, immigrants in Italy from 2008-2015 represented a clear net gain.

Rama D. Mariani, Anna Maria Mayda, Furio C. Rosati, Antonio Sparacino

How do immigrants affect local public finances? Evidence from Italy

CEPR Discussion Paper 19596