TABLE 7.5 Average Fiscal Impact of an Immigrant Overall and by Education Level (1996 dollars)


Education Level of Immigrant


< High School

High School

> High School


Immigrants (baseline)a





Immigrants themselves










a Based on estimated educational transition probabilities.

Row 1 of the table shows the total impact of an immigrant, including the impacts of future descendants born in the United States, and rows 2 and 3 show the components attributable to the immigrant during her own lifetime and to her U.S.-born descendants, respectively. (Note that much of the impact of descendants is actually experienced during the lifetime of the immigrant.) We see that the impacts of the immigrants themselves vary widely by level of education and are substantially negative for all those with less than high school education. By contrast, their descendants have remarkably similar and highly positive effects across the education levels of the immigrant parent, reflecting the considerable upward educational mobility of the children of all immigrants.

Now consider differences in average NPV by age at arrival in the United States. Figure 7.13 shows the average across education levels of the age-specific NPVs, with weights at each age given by the distribution of recent immigrants by educational category. Here we see that, if the only policy goal were making the total fiscal impact as positive as possible, it could be achieved by admitting only


have zero marginal cost but are of value to the immigrant. Second, the fiscal impact of the immigrants themselves is far less positive or far more negative than the total impact, including the impacts of their descendants. Third, all that really matters to the economic incentives to emigrate is the difference between the expected lifetime value of after-tax earnings plus the value of government services received in the United States and those in the country of origin, and this is surely a very large incentive regardless of the fiscal impact. Fourth, potential immigrants may compare the fiscal ''deal" they would get in the United States to that they would get in other high-wage developed countries. The United States does not have particularly high taxes in the international context. All governments provide public goods, and this is a big part of the story. The current deficit contributes something to the positive NPVs, but only about half as much as defense spending, and the United States does not have a particularly high ratio of debt to GDP compared with other Western European countries. In other words, these high NPVs are most likely a fact of life for industrial nations. Potential immigrants cannot avoid this situation by shopping around; the United States probably looks better than most in this regard.

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