The Fiscal Impact of EU Immigration on the Universalistic Welfare State

Are inclusive welfare states compatible with free movement of people? For long the nexus between immigration and the welfare state has been perceived as fragile or even unsustainable. In this paper, we examine the fiscal impact of European Union (EU) immigration on the universalistic, tax-financed welfare state of Denmark, on the argument that it constitutes a crucial case within an exceptional system for examining the unsustainability thesis. On the basis of a unique dataset of administrative data, consisting of repeated cross sections of 100% of the population of EU citizens residing in Denmark on the December 31st of each year between 2002 and 2013, we analyse EU citizens’ contribution to and consumption of welfare benefits, in order to research the evolution of net fiscal contribution to the welfare state over a long time span. We find that EU immigrants made a significant positive net contribution to the Danish welfare state. Not only have EU citizens paid their way through the welfare system. They have also made a considerable contribution to its fiscal sustainability.