The Fiscal Effect of Immigration: Reducing Bias in Influential Estimates

Michael Clemens

No 15592, IZA Discussion Papers from Institute of Labor Economics (IZA)

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 cashflow accounting offer precision at the cost of bias; methods based on general equilibrium modeling 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.

Keywords: immigration; fiscal; tax; revenue; budget; deficit; surplus; capital; cost; benefit; dividend; subsidy; burden; social security; welfare; outlays; balance; foreign; skill; government; public (search for similar items in EconPapers)
JEL-codes: F22 H68 J61 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2022-09
New Economics Papers: this item is included in nep-int, nep-lab and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://docs.iza.org/dp15592.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 (2021)
Working Paper: The Fiscal Effect of Immigration: Reducing Bias in Influential Estimates (2021)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:iza:izadps:dp15592

Ordering information: This working paper can be ordered from
IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany

Access Statistics for this paper

More papers in IZA Discussion Papers from Institute of Labor Economics (IZA) IZA, P.O. Box 7240, D-53072 Bonn, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Holger Hinte ().