Free Movement versus European Welfare States? Variations of the Fiscal Effects of EU Migrants across Welfare State Regimes

Abstract

Strong claims have been made about the incompatibility between large-scale migration and advanced welfare states. The free movement of workers within the European Union (EU) offers an interesting case for the study of the fiscal effects of unrestricted labor migration in different types of welfare states This article therefore investigates the alleged tension between advanced welfare states and liberal migration policies by analyzing how the fiscal effects of EU migrants vary across European welfare state regimes. In contrast to arguments commonly made in public debates, we argue and explain why theoretical reasoning should lead us to expect limited differences in fiscal effects of EU migrants in different welfare states. The empirical analysis, covering twenty-nine countries during 2004–15, shows that the net fiscal impact of EU migrants in the different welfare state regimes of West European countries is positive, and we find no major differences in the fiscal impacts of EU migrants across Western regimes. These results from the EU case cast doubts on the claim that advanced welfare states are incompatible with large-scale immigration because of adverse fiscal effects, and on the idea that broad institutional characteristics of welfare states have substantial consequences for the fiscal impact of migration.