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Department of Economics, Norwegian School of Economics (NHH) Discussion Paper Series in Economics, Department of Economics, Norwegian School of Economics (NHH)

No 22/2015:
Trading off Welfare and Immigration in Europe.

Ole-Petter Moe Hansen () and Stefan Legge ()

Abstract: In this paper, we explore the trade-off Europe faces when choosing between immigration from poor countries and welfare spending. Using data from the European Social Survey on sixteen countries from 2002-2012, we document that voter preferences shifted in favor of redistribution but polarized over low-skill immigration. Notably, there is a sharp increase in the share of individuals supporting the welfare state but heavily opposing immigration. In order to provide an economic explanation for these phenomena, we present a model where support for both immigration and redistributive policies are potentially motivated by altruism. Using this model, we show how rising unemployment rates, shares of foreign-born citizens and aggregate education can explain observed shifts in policy preferences.

Keywords: Redistribution; Immigration; Unemployment; Inequality.; (follow links to similar papers)

JEL-Codes: F22; H20; O15; (follow links to similar papers)

58 pages, October 1, 2015

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