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Freedom of Movement in the EU
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This paper contains a review of the economics literature on the issue of the relationship between immigration and welfare. The review is organised around two questions. First, are immigrants, especially low-skilled immigrants, attracted to welfare-generous states? Second, are immigrants more likely to be recipients of welfare compared to natives? The evidence with respect to both questions suggests that the more extreme fears sometimes expressed in public discourse are exaggerated. While some groups of immigrants might be attracted to welfare-generous states, the effect is unlikely to be significant in terms of public budgets. Similarly, while examples do appear of certain sub-groups of immigrants using welfare more intensively than natives, there are many examples where the opposite holds or where no difference is found. In spite of these findings, a case can still be made that policies should be adopted which convince native populations that excess welfare use by immigrants cannot arise. Such policies may be needed if on-going immigration, which is desirable on many grounds, is to avoid negative political pressure.
The issue of welfare receipt by immigrants is highly controversial across Europe. In this paper we assess whether immigrants are more likely to receive welfare payments relative to natives across a range of European countries. Using the European Union Survey on Income and Living Conditions for 2007, we find very little evidence that immigrants are indeed more likely to receive such payments when all payments are considered together. This is true whether we use raw data or regression analysis in which we control for relevant characteristics We do find evidence of higher rates of poverty among immigrants. When combined with the results on welfare receipt, this raises a question over the effectiveness of welfare systems in protecting immigrants from poverty across Europe.
The primary purpose of this paper is to provide a review of the papers within the economics literature that have examined the questions of immigrant welfare use and the responsiveness of immigrants to the incentives created by welfare systems. While our focus is largely on papers looking at the European case, we also draw on studies from the United States, in particular on issues where the European literature is thin. One set of papers asks whether immigrants who are more likely to use welfare are attracted to more generous welfare states. The results from these papers are not clear-cut. Another set of papers asks if immigrants use welfare more intensively than natives and if they assimilate out of or into welfare participation. In most cases, the unadjusted data shows higher use of welfare by immigrants although for some countries, for example Germany, this difference can be explained by differences in characteristics. Yet another set of papers finds that the rate of welfare use by existing migrants can influence the welfare use of newly arrived co-nationals. We illustrate some of these issues by looking at immigrant welfare use in Ireland and the UK. Immigrants in the UK appear to use welfare more intensively than natives but the opposite appears to be the case in Ireland.
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