Literature review on the fiscal impacts of immigration

As immigration has become more salient in Ireland, debate over the fiscal and economic impact of migration has increased. Understanding and communicating how migration is related to public finances and the economy is crucial to informing both government strategy and the public debate. In this paper, we review literature on the fiscal impacts of migration to draw conclusions that are relevant to the Irish context. It should be noted that this is narrower than the economic impacts, relating only to the public finances rather than the broader economic impacts of migration (e.g. labour markets, growth, innovation, and productivity). The findings regarding the fiscal impact of immigration should not therefore be confused with its economic impact. 

The aim of this paper is to assess what we do and do not know about the fiscal impact of immigration in general and in Ireland.

A crucial caveat to this research is that assessments of fiscal impact require several methodological decisions that can substantially change the results of the evaluation. For example, decisions need to be made about what taxes or spending to include and how to attribute them (e.g. education, pure public goods like flood defences, corporate taxes); whether to look only at a specific period, such as 2015-2020, or to try to estimate how migration will affect public finances decades into the future; what measure of impact to use; what time period to choose (as economic shocks have a significant impact on the fiscal balance of both migrants and natives); and who to count as a migrant. Data availability is also a significant challenge to building a comprehensive understanding of how immigration relates to the state’s finances.