Fiscal Implications of Immigration—A Net Present Value Calculation

Abstract

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.