Immigration and Voting on the Size and the Composition of Public Spending

Abstract

This paper develops a model to analyze the effects of immigration by skill on the outcome of a majority vote among natives on both the size as well as the composition of public spending. Public spending can be of two types, spending on rival goods (transfers) and on non-rival goods (public goods). I find that the effect of immigration on public spending depends on preferences for the different types of spending. In particular, immigrants of either skill can increase (decrease) the size of total public spending, if natives have a relative preference for spending on public goods (spending on transfers). I provide some illustration of spending patterns in OECD countries during 1980 - 2010.