Humboldt-Universität zu Berlin - Migration und Sozialstaat

Which fiscal effects does the migration have for the modern welfare state system?

The dominant view assumes that generous welfare systems in destination countries could negatively affect the qualification composition of migrants and thus might result in a negative effect of migration on the welfare state (Borjas 1999).

However, there are numerous references in the literature to aggregate positive fiscal effects, even in the case of non-highly qualified immigration (Dustmann & Frattini 2014; Kancs & Leccas 2017). Bonin et al. (2000) along with Storesletten (2000) show that migration can partially reduce the demographic burden of future generations. A net burden is however also possible, depending on the qualification structure and migrant labor market integration (Bonin 2014; Raffelhüschen & Moog 2016).

Roughly two approaches in the literature can be distinguished, which each have different weaknesses:

  1. Generational accounting approaches that attempt to capture the average fiscal balance of different cohorts over time (Auerbach et al., 1991), but which ignore income effects of other factors of production (capital, indigenous labor) that could have a complementary or substitution relation to the fiscal impact of immigration. In this way, it does not capture significant portions of the actual contribution of migration (Brücker et al., 2013).
  2. Equilibrium models (Razin et al. 2011; Docquier et al. 2014), that reflect the individual contribution and transfer structure, but only in a very simplified way. Besides that, it is common that the probability of return migration (central to age related security reasons), investments in human capital or labor force participation are often not taken into account over time.


It is therefore planned to combine a detailed accounting of the paid contributions and received transfers during the life course of migrants by modeling the fiscal migration effects in equilibrium models, and to observe gender aspects as well as fertility decisions. Seen as suitable data basis, the IAB-SOEP Migration Sample and the IAB-BAMF-SOEP Survey of Refugees should be used accordingly.