Does Immigration Weaken Natives' Support for the Welfare State? Evidence from Germany

Abstract:     
Using data from the 1997 and 2002 waves of the German Socio-Economic Panel and from official statistics, the present paper studies whether natives are less supportive of state help for the unemployed in regions where the share of foreigners among the unemployed is high. The effect of immigration or ethnic diversity in general on the political support for the welfare state has received increasing attention in the last decade, both in academia and in the political debate. Some authors have argued that a certain social cohesion is not only the result of, but also a necessary condition for social policy and redistribution, and that ethnic diversity weakens this social cohesion. Previous empirical studies have given mixed results, however. Unlike these previous studies, I use individual-level panel data, which allows a more convincing identification of a causal effect. Also, the effect of immigration on support for redistribution has not been studied for Germany - Europe's largest country of immigration in terms of absolute numbers - before. Finally, similar to the influential study by Luttmer (2001), I am able to relate the support for a particular aspect of the welfare state (help for the unemployed) not just to the overall share of foreigners in the population, but also to their share among the unemployed. The main result is that there is indeed evidence that German natives’ support for the unemployed is negatively affected by the regional share of foreigners among the unemployed. This still holds when individual characteristics are controlled for, and also when only the within variation is exploited, although in the latter case the estimates are not always statistically significant at conventional levels. Concerning practical significance, I find that a one standard deviation increase in the regional share of foreigners among the unemployed reduces natives’ support for helping the unemployed by about two percent of the standard deviation. This effect is rather small compared to other variables such as income, self-employment, or East German origin.

Number of Pages in PDF File: 62

Keywords: redistribution, social security, welfare state, immigration, ethnic diversity, Germany, cluster-robust standard errors, two-way clustering

JEL Classification: H53, H55, I38, J15, J61

working papers series