23 Oct 2008Working Paper Summaries

Economic Impacts of Immigration: A Survey

by Sari Pekkala Kerr and William R. Kerr

International migration is a mighty force globally. According to United Nations statistics, over 175 million people, accounting for 3 percent of the world's population, live permanently outside their countries of birth. This paper surveys the economic impacts of immigration for host countries, mostly emphasizing the recent experiences of Northern Europe and Scandinavia. The paper documents how migrant flows to some countries within this region are now of similar magnitude to the United States. The authors discuss the impact of immigration on national labor markets in terms of both immigrant assimilation and possible native displacement. Their survey concludes with the impact of immigration on the public finances of host countries, which is of particular policy importance within Europe today given ageing populations and fiscal imbalances. Key concepts include:

The general view on immigration overstates the adverse effects of immigration on natives of the host countries in terms of labor market or wage displacement.
Immigrants' use of social benefits varies widely across countries, as does the degree of assimilation into or out of the host country's welfare system.
Immigration is generally viewed as a large fiscal burden for European public sectors (or as a possible savior if correctly harnessed). Most empirical studies, however, estimate the fiscal impacts of immigration to be relatively small.

Author Abstract

This paper surveys recent empirical studies on the economic impacts of immigration. The survey first examines the magnitude of immigration as an economic phenomenon in various host countries. The second part deals with the assimilation of immigrant workers into host-country labor markets and concomitant effects for natives. The paper then turns to immigration's impact for the public finances of host countries. The final section considers emerging topics in the study of immigration. The survey particularly emphasizes the recent experiences of Northern Europe and Scandinavia and relevant lessons from traditional destination countries like the U.S.