Public Sector Transfers and Income Taxes among Immigrants and Natives in Sweden*
| DOI | http://doi.org/10.1111/j.1468-2435.1990.tb00143.x |
| Author | B. GUSTAFSSON |
| Published date | 01 June 1990 |
| Date | 01 June 1990 |
Public Sector Transfers and Income Taxes among
Immigrants and Natives in Sweden
*
B.
GUSTAFSSON**
INTRODUCTION
A recent characteristic of international migration has been the influx of migrants from
less to more developed countries. This has several economic implications for the host
countries. One such effect is via the public sector budget since people pay income taxes
and receive public sector transfers. In recent research, attempts have been made to
quantify such effects. In this paper we present results for Sweden paying special attention
to immigrants from developed countries.
The paper is arranged in the following way: Section
2
reviews similar studies from
different countries. Section
3
describes trends in immigration to Sweden. The analytical
framework
for
the study is outlined in Section
4,
and the data used are presented in
Section
5.
Results are reported in Section
6,
followed by a discussion in the final
section.
A REVIEW OF EARLIER STUDIES
With regard to public sector transfers and income taxes, systematic comparisons of
natives and immigrants are few. In
a
study of the United States', Simon
(1
984)
estimated
participation rates and transfer payments for various immigrant cohorts
for
the year
1975.
However, he did not make calculations for immigrants who arrived before
1950.
He found that new immigrant cohorts received considerably less in public sector
transfers than their native counterparts, the difference being largest for recent arrivals.
The divergence from the native population was due to social security payments, while
welfare payments to immigrants were
as
large as those of natives. Estimates
of
taxes paid
were made on the basis of information available on incomes. Taking transfers, other
services and income taxes into account, Simon estimated that, on average, each
immigrant cohort made a net economic contribution to the native population.
Using the same data, Blau
(1
984)
compared receipts
of
transfer payments by all
foreign-born families including earlier arrivals not studied by Simon and natives. The
category All Foreign Born was on average considerably older than natives. Results
showed that immigrants on average received more welfare and social insurance benefits
*
**
This work was supported by a grant
from
the Delegation
for
Social Research
of
the Swedish
Ministry
of
Health and Social Affairs.
University
of
Goteborg, Goteborg (Sweden).
181
than natives. However, using multivariate analysis, Blau was able to show that age and
age-related variables play a major role in explaining the observed difference. Taking
personal characteristics and other variables into account, immigrants were found to
depend less on welfare and to receive lower levels of welfare payments than native
families.
However, for particular immigrant groups, results could be different. Using 1980 U.
S.
Census data, Muller and Espenshade
(
1985) investigated Mexican immigration.2 State
and local outlays on education and social services as well as various taxes were analysed.
The results showed that the balance between taxes and expenditures was small for all
families but negative for Mexican immigrants. The latter was due mainly to low earnings
and large families for Mexicans.
Massey
(
1986) investigated immigrants to the
U.
S.
from four communities in Mexico.
Among other things, Massey studied the use of transfer payments in relation to years of
migrant experience. The fraction receiving unemployment compensation, welfare and
social security benefits increased with years in the United States as did the proportion of
migrants with legal papers. The author concludes that the relation between migrant
experience and participation rates in public programs reflects the process of
legalization.
Tienda and Jensen
(1
986) studied poverty rates for immigrants and natives
differentiated after race, using 1980 Census data. For whites, poverty rates were almost
identical for immigrants and natives. Among blacks, however, poverty rates were lower
for immigrants, while the opposite was true for Hispanics and Asians. The data showed
that Asian and Hispanic immigrants had higher, and white and black immigrants lower
rates of public assistance compared to their native counterparts. However, multivariate
analysis indicated that much of the disparity between nationalities could be attributed to
individual, family and locational characteristics. Some results even pointed in the
direction of greater welfare utilization among natives than immigrants. Similar results
were received when the analysis was further developed methodologically in Jensen
&
Tienda
(
1988) and also when covering data from the 1970
U.
S.
Census in Jensen
(1
988).
Thus, these results are in agreement with those of Blau (1984).
Using data from 1975-6, Kakwani
(1
986) investigated the Australian population
grouped after period of residence. Persons from recently arrived families were found to
enjoy a higher economic well-being than the natives. However, this was not the case for
immigrants who had arrived at least
I0
years earlier.3 Without exception, immigrants
received less in public sector transfers than the native population. From the tables in the
study it can be calculated that the net difference between income taxes paid and public
sector transfers received was, compared
to
natives, somewhat larger for most groups of
immigrants compared to the natives, indicating that natives, through this channel,
benefit from immigration.
Wadensjo
(1
973) studied immigrants who, at the end ofthe 1960s, had recently arrived
in
Sweden. Compiling data from various sources, he calculated the net difference
between taxes paid and share
in
public expenditures. Calculations were made for elderly
and younger immigrants from Finland, Italy, Yugoslavia and the Federal Republic of
Germany. The net difference was found to be negative for all types of elderly immigrants,
and positive for all young immigrants. The effect of the second group outweighed the
effect of the first group, thus making immigration on average beneficial to the original
population.
Using a technique similar to Wadensjo’s, Ekberg (1983) calculated net differences for
the average immigrant in 1970 and 1976. For both years immigrants were paying more
taxes than public sector transfers received and share in public expenditures. The net
182
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