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BIPR | The Fiscal Impact of Immigration in the United States: Evidence at the Local Level
The Fiscal Impact of Immigration in the United States: Evidence at the Local Level

December 19, 2022 - 18:30

Anna Maria Mayda, Georgetown University, US

Event Recap

Anna Maria Mayda, Professor of Economics at Georgetown University, was motivated to undertake research on the fiscal impact of immigration by a lack of empirical literature on this very important subject. Mayda begins by recognizing the significant impact that immigration has on politics around the world. The role that immigrants play in their destination countries is highly debated, due to their myriad effects on the labor market, the welfare state, markets of goods and services, housing, and non-economic factors such as culture and politics. For example, she highlights how immigration affects voting behavior in the United States. Voters are concerned with their tax rates, disposable US income, quantity and quality of the provision of public goods and services, and income tax rates. Mayda's research is focused on the fiscal effects of immigration at the local level in the United States, in particular the impact of immigration on public revenues, public expenditures on goods and services, and more generally the welfare state. Through her research, Mayda sheds light on the implications of immigration for public spending and the asymmetric effects of high-skill and low-skill immigration.

Professor Mayda notes that previous research tends to use macroeconomic models to simulate the effects of immigration on government revenues and expenditures; however insightful and interesting, Mayda believes that such models may not be comprehensive in capturing the indirect fiscal effects of immigration, which is a focus of her study.

Specifically, Professor Mayda seeks to analyze the causal effects of immigrants on local government spending outcomes. She finds that immigrants had on average between 1990 and 2010 a small effect on the provision of public goods of 0.3% per year. This ostensibly small effect emerges because it is an average across skill groups: if skill heterogeneity of immigrants is taken into account a different picture emerges with public expenditures decreasing with low-skilled immigration and increasing with high-skilled immigration. There is also some evidence that the impact of second-generation immigrants on local public finances is more positive than that of the first-generation.



Full Audio:

The Fiscal Impact of Immigration in the United States: Evidence at the Local Level

hosted by Professor Michael G. Plummer

Anna Maria Mayda
Georgetown University, US

This paper studies the causal impact of immigration on provision of locally provided public goods using US county-level data from 1990 to 2010. We uncover substantial heterogeneity in fiscal effects depending on the skill levels of immigrants and across locations in the United States. The inflows of high-skilled immigrants result in an increase in per capita expenditures at the local level, while the inflows of low-skilled immigrants have the opposite effect. This is mainly due to the asymmetric impact different types of immigrants have on locally generated per capita revenues. Movements in per capita property, sales and income taxes, trace movements in per capita income and housing prices in response to immigrant inflows. This results in change of both the level and composition of per capita expenditures, because intergovernmental transfers do not fully offset the changes in own revenues. While the federal government smooths out the shock to local revenues to some extent, state governments may exacerbate it due to spatially correlated immigration shocks. The fiscal impacts substantially differ across US counties due to differences in terms of the type of immigrants they receive. There is some evidence that the impact of second-generation immigrants on local public finances is more positive than that of the first-generation.

ANNA MARIA MAYDA

Anna Maria Mayda is a Professor of Economics at Georgetown University, with a joint appointment in the Economics Department and School of Foreign Service.

Mayda studied statistics and economics at University of Rome La Sapienza, where she received her degree summa cum laude. She received a MA and PhD in Economics at Harvard University, where she was also a doctoral fellow at the Center for International Development. Before graduate school, she worked at the World Bank in the Latin America and Caribbean Region Unit, and was a visiting scholar in several institutions including the Trade Unit of the IMF Research Department, University of Milan, EIEF in Rome and CEPII in Paris. More recently Mayda was Senior Economist and Senior Adviser in the Office of the Chief Economist at the US State Department in the Obama Administration. She is a Research Affiliate at CEPR, IZA and CReAM.

Mayda's research mainly focuses on issues of trade, immigration and political economy and has been published in journals such as the Quarterly Journal of Economics, the Review of Economics and Statistics, the Journal of International Economics, American Economic Journal: Applied Economics, the Journal of Development Economics and the European Economic Review. She has also been awarded two National Science Foundation (NSF) grants. Topics she has worked on include: the determinants of individual attitudes towards trade and immigration across countries; the role played by interest groups in shaping US trade and migration policy; multilateral trade negotiations and preferential trade agreements; the determinants of international migration flows; the H-1B visa and the Refugee Resettlement programs in the US; the political and fiscal impacts of immigration to the United States.
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