Academic Literature

Immigration in West Germany after the End of World War II – Farm and business owners and welfare spending were raised

How does immigration of poor people affect the lives of natives? This old policy question has recently gained extra attention in countries with large immigrant and refugee inflows. One recurring concern in the public debate is that generous welfare states attract low-skilled immigrants who supposedly benefit from public spending while contributing little in taxes. Consequently, immigration may reduce the level of taxation and spending if it lowers native voters’ support for redistributive policies – possibly also at the expense of poor natives.

After the end of World War II, twelve million Germans were forcibly displaced from the territories ceded to Poland and the Soviet Union. Around two-thirds of them settled in West Germany, which increased the West German population by almost 20% within a very short period of time, with the migrant population share varying by county from below 2% to more than 40%. These migrants were considerably poorer than the average native. However, as German citizens, they had voting rights and were eligible for social welfare from their time of arrival.

Using panel data for West German cities, the study finds that local governments responded to the migration shock with selective and persistent raises in local taxes as well as shifts in municipal spending. Farm and business owners were taxed more while residential property and wage bill taxes remained largely unchanged (see figure below). High-inflow cities significantly raised welfare spending while reducing spending on infrastructure and housing.

Chosen excerpts by Job Market Monitor. Read the whole story at Immigration of poor voters increases redistribution

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