Fiscal Consequences of the Refugee Crisis

Abstract

AbstractThe European Union faced an unprecedented influx of asylum seekers during the 2014–2016 refugee and migration crisis. The admitted refugees pose a critical challenge, but at the same time represent an opportunity for the host countries’ public finances. If the fiscal balance of immigration is positive, then migrants become net contributors to public budgets, helping to alleviate the aging related fiscal burden. However, we argue that this is highly unlikely to happen with refugees entering extensive European welfare states, at least in the short and medium term. By reviewing the existing empirical literature, we demonstrate that the research on the fiscal effects of refugee (or non‐Western) immigration almost uniformly supports the conclusion that the fiscal balance is going to be negative. The noble aims of humanitarian obligation to accept refugees seem to be in conflict with the pragmatic economic interest – a fiscally beneficial immigration – this time.