The fiscal impact of immigration in OECD countries

Whether immigrants make the fiscal challenges faced by OECD countries more difficult or whether they aid in addressing them is a topical question in many OECD countries. This chapter provides a first-time comparative analysis of the fiscal impact of immigration in OECD countries, using data for all European OECD countries, as well as Australia, Canada and the United States. It also includes a comprehensive overview of the literature and the methodological issues involved in estimating the fiscal impact of migration. Depending on the assumptions made and the methodology used, estimates of the fiscal impact of immigration vary, although in most countries it tends to be small in terms of GDP and is around zero on average across OECD countries.Immigrants tend to have a less favourable net fiscal position than the native-born, but this is almost exclusively driven by the fact that immigrant households contribute on average less in terms of taxes and social security contributions than the native-born and not by a higher dependence on benefits. Employment is the single most important determinant of migrants’ net fiscal balance, particularly in countries with comprehensive social protection systems. More generally, differences in the composition of the migrant population by migration category (labour, family, humanitarian) account for a large part of the cross-country variation of migrants’ fiscal position relative to that of the native-born. There is also a strong impact of the age of immigrants on their net fiscal position.