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4 percent. We have also used 6 percent and 8 percent as a rough reflection of the uncertainty of future tax revenues, and the asymmetric valuation placed on the consequences of upward and downward variations.)
Immigrants continue to receive benefits as they do in 1994-95, for which we have CPS data. (Alternatively, they do not receive SSI, AFDC, Medicaid, food stamps, rent subsidies, energy assistance, public housing, or earned income tax credits during their first five-years in the United States, in accord with the welfare reform legislation of 1996 and assuming they become citizens after five-years).
The taxes immigrants pay change as indicated by the cross-sectional data as their stay in the United States lengthens up to 10 years; after that, their taxes relative to the age-specific tax payments by natives are fixed. (Alternatively, their tax payments continue to change to the empirical estimate for durations in the United States of 10+ years.)
Immigrants arriving after age 55 are allocated the OASDHI benefits estimated from the data. (Alternatively, immigrants arriving after age 55 are assumed to receive no OASDHI benefits, since they would not be able to qualify for them before age 65.)
Thirty percent of immigrants later emigrate, taking with them all their young children. Consequently, 16 percent of those born in the second generation are assumed to emigrate with their parents. (Alternatively, none of these second-generation children emigrate, and only 20 percent of first-generation immigrants emigrate.)
Costs of bilingual education raise the cost of educating immigrant and second-generation children by 22 percent and 16 percent, respectively (versus only half of these increases, or an additional 11 percent and 8 percent, respectively).
Net Present Values
Based on these baseline assumptions on the constructed longitudinal profiles and on the demographic assumptions, we can calculate the present value of the taxes paid by the marginal immigrant and his descendants minus the present value of all costs they impose. The effects further in the future have less importance today than do those closer to the present. The government can borrow or lend money, to be repaid in the future, at some real rate of interest, and future fiscal impacts should be discounted at this same rate. In some circumstances, discounting the future is also a way to reflect uncertainty about it, particularly when we care more about negative than about positive departures from our expectations. The net present value, or NPV, of an immigrant's future fiscal impacts is just the sum of all the discounted impacts.
The NPV is conditional on the age of arrival of the immigrant, since this strongly influences the benefits received, the taxes paid, and the number of his or