Fiscal Implications of Immigration - A Net Present Value Calculation

Kjetil Storesletten, University of Oslo

Abstract

Focusing on the net fiscal effects, the gain from admitting immigrants is computed for a welfare state with large expenditures and a large tax burden (Sweden). Prices and behavior are held constant, which allows a detailed analysis of the effects of immigration. The present value of future tax revenues minus outlays is potentially large; USD 23,500 per young working-age immigrant, but an average new immigrant represents a net government loss of USD 20,500. The dominant factors are employment rates and age. For young working-age immigrants, the ‘‘break-even’’ participation rate for which the gain would be zero is 60%, well below the empirical rate for this group