Alex Nowrasteh

The Fiscal Impact of Immigration

The fiscal impact of immigration — how immigrants and their descendants affect government budgets — is a widely debated and contentious issue. Economists overwhelmingly accept the economic gains of immigration, but are less certain about immigrants’ impact on government budgets. Contention over this issue is fueled by the numerous methodologies and complexity of analysis that obscure the fiscal costs of immigration.The complexities are many. Each layer of the United States’ federal structure of government — federal, state, and local — is funded by different types of taxes and each spend their budgets on different programs and in different ways.The types of public goods consumed by immigrants also affect their fiscal impact. If the public goods are “pure,” meaning that they are non-rivalrous and non-excludable, then more taxpayers in the form of immigrants spread out the tax cost without diminishing the quality of the goods. Immigrants lower the tax burden of providing pure public goods. But, if the public goods are “congestible,” more immigrants could decrease the quality of the goods, prompting the government to spend more tax dollars to maintain the quality. Some congestion occurs for most government-supplied goods whenever population increases, by immigration or through procreation, but the fiscal impact varies widely.Immigrants also impact the U.S. economy. They can displace U.S.-born workers, complement them, or have little impact on their employment opportunities, all of which alter tax revenue and government welfare expenditures in different ways. Immigrants are also consumers of real estate and other goods and services in the United States, boosting aggregate demand and spurring investment that further grows the taxable economy. The methodologies employed to study the fiscal impact of immigration are also numerous and complicated. This chapter will examine these methodologies’ relative merits and demerits, and present the common findings of the major studies using the various methodologies.

The Deep Roots of Economic Development in the U.S. States

The “Deep Roots” literature investigates the effects of deep cultural variables on outcomes. We attempt to identify how these deep cultural variables actually affect per capita output by expanding Putterman and Weil’s (2010) inquiry on the effects of State History and Agricultural History to the populations of the fifty U.S. States. In the course of this application, we uncover two distinct points while giving a qualified validation of Putterman and Weil. First, the effects of deep roots on outcomes are only clearly apparent after controlling for the percent of the population that is non-Hispanic white because that population is negatively correlated with per capita income after controlling for State History or Agricultural History. Second, while we find some support of the conclusion that deep roots impact outcomes by altering institutions, deep roots do not have any impact on liberal economic institutions at the state level.

US Immigration Levels, Urban Housing Values, and their Implications for Capital Share: US IMMIGRATION LEVELS, URBAN HOUSING VALUES, AND THEIR IMPLICATIONS FOR CAPITAL SHARE

This article applies previously estimated effects of immigration on housing values to urban counties in the United States. Our findings here also help estimate how much of the increase in the net capital share of income since 1970 as observed by Piketty ([Piketty, T., 2014]) is caused by immigration. We find that in most urban counties in the United States, increased levels of immigration have had a modest but non‐negligible effect on the level of real estate prices and, per Rognlie ([Rognlie, M., 2015]), likely capital share. These estimates provide hard numbers for the public debate over immigration policy in the United States, with implications elsewhere as well.