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 crossborder 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.

Free movement of people and cross-border welfare in the European Union: Dynamic rules, limited outcomes

“…Instead, our findings strongly suggest that EU citizens have earned their way into the system, having resided for years in the host member state and been subjected to the payment of taxes and contributions. Elsewhere, we confirm the positive fiscal impact of EU citizens on the Danish welfare budget (Martinsen and Pons Rotger, 2017).…”

“…Currently, the empirical call is equally strong, as EU rules are contested, indeed also beyond Brexit (Geddes and Hadj-Abdou 2016;Reenen 2016 Elsewhere, we confirm the positive fiscal impact of EU citizens on the Danish welfare budget (Martinsen and Pons Rotger 2017).…”

“…(1) EU citizens are not motivated by welfare as such. As findings elsewhere demonstrate, they are overrepresented in work-active age groups, suggesting that migration is foremost motivated by work (Martinsen and Pons Rotger, 2017). (2) EU citizens apply less frequently for benefits.…”

“…Figure 1 reports graphically the EU population in Denmark in total and the 16-to 64-years-old eligible group between 2002 and 2013. In the 12 years' time span, we see a considerable increase in residing EU citizens in Denmark, mainly explained by EU enlargement leading to more residents from the new member states (Martinsen and Pons Rotger, 2017).…”

No welfare magnets – free movement and cross-border welfare in Germany and Denmark compared

“…Over the last decades, European Union (EU) legislation and case law from the European Court of Justice (ECJ) have created a free movement regime in which EU citizens not only enjoy the right to freely move and reside within the Union's territory but also have, subject to certain limitations, access to the welfare system of their host member state. 1 The formation of such a 'dually open' free movement system has evoked considerable concerns in EU member states about welfare-motivated migration, portraying the welfare state as vulnerable to people on the move (Ruhs 2015;Hassel, Steen Knudsen, and Wagner 2016;Martinsen and Pons Rotger 2017;Blauberger et. al.…”