The economics literature generally finds a positive, but small, gain in income to native-born populations from immigrants and potentially large gains in world incomes. But immigrants can also impact a recipient nation’s institutions. A growing empirical literature supports the importance of strong private property rights, a rule of law, and an environment of economic freedom for promoting long-run prosperity. But little is known about how immigration impacts these institutions. This paper empirically examines how immigration impacts a nation’s policies and institutions. We find no evidence of negative and some evidence of positive impacts in institutional quality as a result of immigration.
This is a preview of subscription content, log in to check access.
Buy single article
Instant access to the full article PDF.
Price includes VAT for USA
Subscribe to journal
Immediate online access to all issues from 2019. Subscription will auto renew annually.
This is the net price. Taxes to be calculated in checkout.
Comparatively little work has been done on the causes of economic freedom. There is some evidence that economic freedom is enhanced by fiscal decentralization (Cassette and Paty 2010), more educated politicians (Dreher et al. 2009), and by the competitiveness of the political environment (Leonida et al. 2007). Djankov et al. (2003a, b), and Bjornskov (2010) examined the determinants of legal institutions consistent with economic freedom. Finally, La Porta et al. (1999) looked at the determinants of various other aspects of economic freedom, such as marginal tax rates and government fiscal size and scope.
Despite the small net gain, Powell (2012) shows that with substantial transfers the rent-seeking costs to policy changes could be much larger than the standard Harberger triangles.
A separate and distinct question, on which there is a larger amount of research, is what the fiscal impact is of immigration given current tax and spending policies. On this point there is less consensus than on the impact of immigrants on the employment opportunities and wages of natives. The fiscal impact of immigration varies considerably depending on the country studied, the characteristics of the immigrants, and model estimated. In general, though, if a consensus has been reached, it is that the net fiscal impact is small. See Kerr and Kerr (2011) for a survey.
This is consistent with Rodrik (1998), who finds that the more open a country is to international trade, the larger government expenditures are as a percentage of GDP so as to mitigate the population’s risk from fluctuations in the international market.
Dimant et al. (2013) found that immigrants increase corruption in recipient countries when they come from corruption-ridden countries. Our measure of property rights and law is broader than just corruption, but contains some components related to corruption.
Acemoglu, D., & Robinson, J. A. (2012). Why nations fail: The origins of power, prosperity, and poverty. New York: Crown.
Alesina, A. F., Baqir, R., & Easterly, W. (1999). Public goods and ethnic divisions. Quarterly Journal of Economics, 114, 1243–1284.
Alesina, A. F., & Glaeser, E. L. (2004). Fighting poverty in the US and Europe. New York: Oxford University Press.
Banting, K., & Kymlicka, W. (2006). Introduction: Multiculturalism and the welfare state: Setting the context. In K. Banting & W. Kymlicka (Eds.), Multiculturalism and the welfare state (pp. 1–45). New York: Oxford University Press.
Barro, R. J. (1996). Democracy and growth. Journal of Economic Growth, 1(1), 1–27.
Barseghyan, L. (2008). Entry costs and cross-country differences in productivity and output. Journal of Economic Growth, 13(2), 145–167.
Bjornskov, C. (2010). How does social trust lead to better governance? An attempt to separate electoral and bureaucratic mechanisms. Public Choice, 144, 323–346.
Borjas, G. J. (1999). Immigration and welfare magnets. Journal of Labor Economics, 17, 607–637.
Borjas, G. J. (2014). Immigration economics. Cambridge: Harvard University Press.
Borjas, G. J. (2015). Immigration and globalization: A review essay. Journal of Economic Literature (forthcoming).
Bowles, A., & Gintis, H. (2011). Schooling in capitalist America: Educational reforms and the contradictions of economic life. Chicago: Haymarket Books.
Brady, D., & Finnigan, R. (2013). Does immigration undermine public support for social policy? American Sociological Review, 79, 17–42.
Burgoon, B., Koster, F., & van Egmond, M. (2012). Support for redistribution and the paradox of immigration. Journal of European Social Policy, 22, 288–304.
Butts, F. R. (1978). Public education in the United States: From revolution to reform. Canada: Holt, Rinehart and Winston.
Canaan, E., ed. (1904). Editor’s introduction to An inquiry in the nature and causes of the wealth of nations, by Adam Smith. London: Methuen & Co., Ltd. Retrieved August 6, 2014 from http://www.econlib.org/library/Smith/smWN0.html#I.56.
Cassette, A., & Paty, S. (2010). Fiscal decentralization and the size of government: A European country empirical analysis. Public Choice, 143, 173–189.
Clemens, M. A. (2011). Economics and emigration: Trillion-dollar bills on the sidewalk? Journal of Economics Perspectives, 25, 83–106.
Collier, P. (2013). Exodus: How migration is changing our world. Oxford: Oxford University Press.
Dawson, J. (2003). Causality in the freedom-growth relationship. European Journal of Political Economy, 19, 479–195.
de Haan, J., & Sturm, J. E. (2000). On the relationship between economic freedom and economic growth. European Journal of Political Economy, 16(2), 215–241.
de Haan, J., Lundstrom, S., & Sturm, J. E. (2006). Market-oriented institutions and policies and economic growth: A critical survey. Journal of Economic Surveys, 20, 157–191.
Dimant, E., Krieger, T. and Redlin, M. (2013). A crook is a crook…but is he still a crook abroad? On the effect of immigration on destination-country corruption. Discussion Paper Series, no. 2013-03. Wilfred-Guth-Stiftungsprofessur fuer Ordnungs- und Wettbewebspolitik, Universitaet Freiburg.
Djankov, S., La Porta, R., Lopez-de-Silanes, F., & Shleifer, A. (2003a). Courts. Quarterly Journal of Economics, 118, 453–517.
Djankov, A., McLiesh, C., Nenova, T., & Shleifer, Andrei. (2003b). Who owns the media? Journal of Law and Economics, 46, 341–381.
Dreher, A., Lamla, M. J., Lein, S. M., & Somogyi, F. (2009). The impact of political leaders’ profession and education on reforms. Journal of Comparative Economics, 37, 169–193.
Easterly, W., & Levine, R. (1997). Africa’s growth tragedy: Policies and ethnic divisions. Quarterly Journal of Economics, 112, 1203–1250.
Ervasti, H., & Hjerm, M. (2012). Immigration, trust and support for the welfare state. In H. Ervasti, J. G. Andersen, T. Fridberg, & K. Ringdal (Eds.), The future of the welfare state (pp. 153–171). Camberley: Edward Elgar.
Everheart, R. B. (1977). From universalism to usurpation: An essay on the antecedents to compulsory school attendance legislation. Review of Education Research, 47, 499–530.
Finseraas, H. (2008). Immigration and preferences for redistribution: An empirical analysis of European social survey data. Comparative European Politics, 6, 407–431.
Freeman, R. (2006). People flows in globalization. Journal of Economic Perspectives, 20, 145–170.
Friedberg, R. M., & Hunt, J. (1995). The effects of immigrants on host country wages, employment and growth. Journal of Economic Perspectives, 9, 23–44.
Greer, C. (1972). The great school legend: A revisionist interpretation of American public education. New York: Basic Books.
Gwartney, J., Holcombe, R., & Lawson, R. (2006). Institutions and the impact of investment on growth. Kyklos, 59, 255–273.
Gwartney, J., Lawson, R., & Hall, J. (2013). Economic freedom of the world: 2013 Annual report. Vancouver, BC: Fraser Institute.
Hall, J., & Lawson, R. (2013). Economic freedom of the world: An accounting of the literature. Contemporary Economic Policy, 32, 1–19.
Justesen, M. K. (2008). The effect of economic freedom on growth revisited: new evidence on causality from a panel of countries 1970–1999. European Journal of Political Economy, 24(3), 642–660.
Kerr, S. P. and Kerr, W. R. (2011). Economic impacts of immigration: A survey, NBER Working Paper 16736.
Kunovich, R. M. (2004). Social structural position and prejudice: An exploration of cross-national differences in regression slopes. Social Science Research, 33, 20–44.
La Porta, R., Lopez-de-Silanes, F., Shleifer, A., & Vishny, R. (1999). The quality of government. Journal of Law Economics and Organization, 15, 222–279.
Leeson, P., & Gochenour, Z. (2015). The economic effects of international labor mobility. In B. Powell (Ed.), The economics of immigration: Market-based approaches, social science, and public policy. Oxford: Oxford University Press.
Leonida, L., Patti, D. M. A., & Navarra, P. (2007). Towards an equilibrium level of market reform: How politics affects the dynamics of policy change. Applied Economics, 39, 1627–1634.
Meissner, D., Kerwin, D. M., Chishti, M., & Bergeron, C. (2013). Immigration enforcement in the United States: The rise of a formidable machinery. Washington DC: Migration Policy Institute.
Meyer, J., Tyack, D., Nagel, J., & Gordon, A. (1979). Public education as nation-building in America. American Journal of Sociology, 85, 591–613.
Powell, B. (2012). Coyote ugly: The deadweight cost of rent seeking for immigration policy. Public Choice, 150, 195–208.
Ralph, J. H., & Rubinson, R. (1980). Immigration and the expansion of schooling in the United States, 1890–1970. American Sociological Review, 45, 943–954.
Razin, A., Sadka, E., & Swagel, P. (2002). Tax burden and migration: A political economy theory and evidence. Journal of Public Economics, 85, 167–190.
Rodrik, D. (1998). Why do more open economics have bigger governments? Journal of Political Economy, 106, 997–1032.
Rodrik, D., Subramanian, A., & Trebbi, F. (2004). Institutions rule: The primacy of institutions over geography and integration in economic development. Journal of Economic Growth, 9, 131–165.
Svallfors, S. (1997). Worlds of welfare and attitudes to redistribution: A comparison of eight Western nations. European Sociological Review, 13, 283–304.
Williamson, C. (2009). Informal institutions rule: Institutional arrangements and economic performance. Public Choice, 139(3), 371–387.
World Bank. (2013). World Development Indicators. Washington DC: World Bank.
We thank the participants at the Association of Private Enterprise Education’s 2014 annual conference, the participants at Texas Tech’s Free Market Institute’s Research Workshop, and an anonymous referee for helpful comments on prior drafts. Support from the John Templeton Foundation is gratefully acknowledged.
About this article
Cite this article
Clark, J.R., Lawson, R., Nowrasteh, A. et al. Does immigration impact institutions?. Public Choice 163, 321–335 (2015). https://doi.org/10.1007/s11127-015-0254-y
- Economic freedom