The fiscal impact of EU immigration on the tax-financed welfare state: testing the ‘welfare burden’ thesis

Abstract:

The European Union’s rules on free movement of people and the right to cross-border welfare are increasingly contested and have evoked one of the most salient debates in EU politics. The assumption that EU immigrants pose a net ‘welfare burden’ on the host member state has sounded loud and wide in recent years. This calls for an empirical test.

In this article, we examine the fiscal impact of EU immigration on the universalistic, tax-financed welfare state of Denmark. We analyse EU citizens’ contribution to and consumption of welfare benefits between 2002 and 2013 on the basis of a unique dataset of administrative data, consisting of repeated cross sections of 100% of the EU population residing in Denmark. We find that EU immigrants made a significant positive net contribution to the Danish welfare state over the long time span examined and thus reject the ‘welfare burden’ thesis for the crucial case of Denmark.