Immigration, Local Public Finances and Provision of Public Goods: Evidence from the U.S.
with Anna Maria Mayda and Walter Steingress
Abstract: This paper studies the causal impact of immigration on local public finances and provision of public goods in the U.S. We uncover substantial heterogeneity across immigrants with different skills, due to their asymmetric impact on the per capita tax base: Absent full insurance through intergovernmental transfers, there is a relative decline in per capita revenues and expenditures with the arrival of low-skilled immigrants, and an increase with high-skilled immigrants. While the two types of immigrants offset each other on average, spatial differences in the share of low- and high-skilled immigrants lead to unequal fiscal effects across U.S. counties; the impacts differ for second-generation immigrants and across public services, with no effect on education. Our results hold using the network shift-share instrument as well as the leave-out push-pull ancestry instrument and are not driven by changes in attitudes towards redistribution with the arrival of immigrants.