Migration and public finances in the EU
Fiorio C.V., Frattini T., Riganti A., Christl M., 2024 – International Tax and Public Finance
The fiscal impact of immigration is one of the most contested topics in the European public debate. According to the 2014 European Social Survey, nearly 44% of Europeans believe that immigrants receive more from the state than they contribute through taxes. This perception fuels negative attitudes and drives policy choices often not grounded in empirical evidence.
In a recent article, “Immigration and Public Finances in the EU”, published in International Tax and Public Finance, Carlo Fiorio, Tommaso Frattini, Andrea Riganti, and Michael Christl provide rigorous and comprehensive evidence on the net fiscal contribution of natives and migrants across EU-14 countries over 2014–2018, a period that includes the so-called refugee crisis.
The research draws on EU-SILC microdata, complemented by EUROMOD — the EU’s tax-benefit microsimulation model, https://euromod-web.jrc.ec.europa.eu/ — and aggregate EUROSTAT data. The main methodological innovation is the inclusion, alongside direct taxes and cash transfers, of indirect taxes (VAT) and in-kind benefits (education, healthcare, social housing), items that are typically absent from standard analyses. The sample covers the 14 EU member states that joined before the 2004 enlargement (EU-14), with a detailed focus on France, Germany, Italy, Spain, and Sweden. For each individual, we define the net fiscal contribution (NFC) as the difference between taxes paid and benefits received.
The central result is unambiguous: in the EU-14, migrants were on average net contributors to public finances, with an annual per capita NFC of approximately €1,510 compared to just €32 for natives. The gap does not stem from higher taxation of migrants — per capita tax revenues are broadly similar across groups — but from lower public expenditure absorbed by migrants (€8,200 per year versus €9,600 for natives). The fiscal advantage of migrants holds even when comparing individuals at the same ventile of the income distribution, with the exception of the bottom ventile — where migrants are also disproportionately concentrated.
The aggregate picture conceals substantial heterogeneity. In Germany, Italy, and Spain, migrants’ NFC exceeds that of natives — in Germany by over €3,200 per capita — while in Italy and Spain natives display a negative net contribution. The situation is reversed in France and Sweden: in France, migrants show a negative average NFC (approximately −€1,170). These differences reflect the varying composition of the migrant population and country-specific tax and welfare institutions.
A regression decomposition shows that migrants’ fiscal advantage narrows considerably — and in some years disappears altogether — when controlling for demographic characteristics (age, gender, education, household size), pointing to positive selection of migrants on these traits. Further controlling for employment status reverses the gap: if employment probability of immigrants and natives were the same, natives would be larger net contributors. The key driver of migrants’ fiscal advantage is thus their higher labour market participation.
The NFC gap shows a slight downward trend over 2014–2018, while remaining positive in favour of migrants throughout. Migrants’ net fiscal contribution grows with years spent in the host country, mainly due to an increasing probability of employment. The share of immigrants in the population has no significant effect on migrants’ per capita NFC. These findings are at odds with the narrative — which is widespread among European populist and nationalist movements — of immigration as a ‘fiscal burden’ on the state. The empirical evidence points in the opposite direction: in the countries and period analysed, migrants contribute more to public finances than natives on average.
Some caveats remain. The analysis is static and does not account for general equilibrium effects. EU-SILC data exclude asylum seekers in collective shelters, underestimating the most vulnerable segment. Cross-country heterogeneity is pronounced, signalling that national institutions — tax systems, welfare arrangements, integration policies — matter greatly.
The policy lesson is clear: migrants’ fiscal contribution depends crucially on their integration into the labour market. Policies that facilitate access to employment – including the recognition of foreign qualifications, language training, and job-matching services – are therefore not only ethically desirable but also fiscally sound. Ignoring this evidence entails costs that are social as well as fiscal.