The Fiscal Effect of Immigration: Reducing Bias in Influential Estimates
Michael Clemens
No 2134, RF Berlin - CReAM Discussion Paper Series from Rockwool Foundation Berlin (RF Berlin) - Centre for Research and Analysis of Migration (CReAM)
Abstract:
Immigration policy can have important net fiscal effects that vary by immigrants’ skill level. But mainstream methods to estimate these effects are problematic. Methods based on cash-flow accounting offer precision at the cost of bias; methods based on general equilibrium modelling address bias with limited precision and transparency. A simple adjustment greatly reduces bias in the most influential and precise estimates: conservatively accounting for capital taxes paid by the employers of immigrant labor. The adjustment is required by firms’ profit-maximizing behavior, unconnected to general equilibrium effects. Adjusted estimates of the positive net fiscal impact of average recent U.S. immigrants rise by a factor of 3.2, with a much shallower education gradient. They are positive even for an average recent immigrant with less than high school education, whose presence causes a present-value subsidy of at least $128,000 to all other taxpayers collectively.
JEL-codes: F22 H68 J61 (search for similar items in EconPapers)
Date: 2021-12
New Economics Papers: this item is included in nep-int, nep-lab, nep-mig and nep-ure
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Citations: View citations in EconPapers (1)
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https://www.cream-migration.org/publ_uploads/CDP_34_21.pdf (application/pdf)
Related works:
Working Paper: The Fiscal Effect of Immigration: Reducing Bias in Influential Estimates (2023) 
Working Paper: The Fiscal Effect of Immigration: Reducing Bias in Influential Estimates (2022) 
Working Paper: The Fiscal Effect of Immigration: Reducing Bias in Influential Estimates (2021) 
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Persistent link: https://EconPapers.repec.org/RePEc:crm:wpaper:2134
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