The Indirect Fiscal Benefits of Low-Skilled Immigration
American Economic Journal: Economic Policy (Forthcoming)
Low-skilled immigrants indirectly affect public finances through
their effect on resident wages & labor supply. We operationalize
this indirect fiscal effect in a model of immigration and the labor
market. We derive closed-form expressions for this effect in terms
of estimable statistics. An empirical quantification for the U.S.
reveals an indirect fiscal benefit for one average low-skilled immigrant of roughly $750 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.