Migration and welfare state spending

Abstract

Is international migration a threat to the redistributive programmes of destination countries? Existing work is divided. This paper examines the manner and extent to which increases in immigration are related to welfare state retrenchment, drawing on data from 1970 to 2007. The paper makes three contributions: (1) it explores the impact of changes in immigration on social welfare policy over both the short and medium term; (2) it examines the possibility that immigration matters for spending not just directly, but indirectly, through changes in demographics and/or the labour force; and (3) by disaggregating data on social expenditure into subdomains (including unemployment, pensions, and the like), it tests the impact of immigration on different elements of the welfare state. Results suggest that increased immigration is indeed associated with smaller increases in spending. The major pathway is through impact on female labour force participation. The policy domains most affected are ones subject to moral hazard, or at least to rhetoric about moral hazard.

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