Fiscal Costs and Benefits of High Skilled Immigration to a Generous Welfare State

Sofie Bødker, Rasmus Højbjerg Jacobsen and Jan Skaksen
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Sofie Bødker: University of Copenhagen and CEBR
Rasmus Højbjerg Jacobsen: CEBR, Copenhagen Business School

No 2013006, Norface Discussion Paper Series from Norface Research Programme on Migration, Department of Economics, University College London

Abstract: We consider the fiscal impact of work related high skilled immigration to a generous welfare state. In a simple theoretical model, we show that, even though a generous welfare state tends to attract immigrants with a high demand for public services, the high skilled immigrants may still be selected among individuals with a relatively low demand of public services. In the empirical analysis we apply a unique Danish data set containing very detailed information on all residents in Denmark, including information on migration. Denmark is interesting, because it has one of the most generous welfare states in the world, and, in spite of that, it turns out that high skilled immigration gives rise to a big net fiscal surplus. Further, high skilled immigrants seem to be selected among those having a relatively low demand of public services.

Date: 2013-02
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