WP4 – Fiscal impacts
Free movement – one of the pillars of the European project – has brought to the fore a number of questions regarding the sustainability of the different welfare systems and labour market policies in European countries. Considering the wide range of such policies within the European Union, intra-EU migration can be expected to have quite different effects in different countries. A crucial factor to consider when comparing the impacts of migration across EU countries is how it affects public finances.
Most previous estimations of the fiscal impact of migration are limited to a single country. Because they generally apply different methodologies, it is difficult to compare the results across Member States. This work package therefore aims to estimate the fiscal effects of intra-EU migration on a country by country basis, using consistent methodology and producing comparable numbers. What this means in practice is attempting to calculate the fiscal contributions (taxes and other payments) made by European citizens, the associated costs (welfare services, pensions, social benefits, etc.) and to what extent this net balance differs between Member States.
To accomplish this we are using the large EU-SILC dataset – the Survey on Income and Living Conditions. This data combines socio-demographic characteristics with self-reported information about income taxes, social security contributions, and social benefits received at the household level, which makes it possible to estimate the net fiscal contributions on a household basis. The approach we use is often called a static, or accounting, model. It is static in the sense that it looks only at the actual contributions made by the current migrant population. As such, it leaves out changes in the composition of the migrant population and dynamic effects which might affect the fiscal contribution made by natives.
The first outcome of these calculations will be a dataset consisting of two main statistics per country. First, the net contribution of EU-migrants as a share of GDP. Second, the average net contribution per EU-migrant. If possible, the dataset will also contain decompositions of these numbers by, for example, labour market status, age or occupational group.
We expect that this dataset will be of use not only to the other work groups in the REMINDER project but also to a wider research community.
At a later stage, we will combine these statistics with data on different measures of tax and social policy, in order to analyse how the fiscal impact of immigration is conditioned by national institutions. For example, we will examine whether contributory welfare systems are less generous towards immigrants than are means-tested systems.