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The Indirect Fiscal Benefits of Low-Skilled Immigration

  • Mark Colas
  • Dominik Sachs
American Economic Journal: Economic Policy
vol. 16, no. 2, May 2024
(pp. 515-50)
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Abstract

Low-skilled immigrants indirectly affect public finances through their effect on resident wages and 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 United States 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.

Citation

Colas, Mark, and Dominik Sachs. 2024. "The Indirect Fiscal Benefits of Low-Skilled Immigration." American Economic Journal: Economic Policy, 16 (2): 515-50. DOI: 10.1257/pol.20220176

Additional Materials

JEL Classification

  • H24 Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes
  • H75 State and Local Government: Health; Education; Welfare; Public Pensions
  • J15 Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
  • J24 Human Capital; Skills; Occupational Choice; Labor Productivity
  • J61 Geographic Labor Mobility; Immigrant Workers
  • J82 Labor Standards: Labor Force Composition
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