How immigration affects the welfare state in the short and long run: Differences between social spending and policy generosity

Abstract

To assess how immigration affects welfare states, studies have mainly used social expenditure as an indocator of welfare state strength, with inconclusive results. Furthermore, the relationship between immigration and different social policy fields has been mostly overlooked, and temporal dynamics have often been ignored. Using data on 21 OECD countries 1980–2010, this paper tests how immigration relates to (a) social expenditures, and (b) generosity of policy in regard to unemployment benefits and public pensions. Using dynamic and static panel models and controlling for relevant structural factors there is evidence for a robust and significant negative association between net migration and spending in the short term, with no evidence that migration increases social spending in later years. Some evidence is found for the compensation hypothesis, i.e., a positive association between net migration and unemployment generosity. A robust positive association was also found for net migration and pension generosity. There is thus little support that migration has a burdening or undermining effect on the welfare state.