Cover: A Cost-Benefit Framework for Analyzing the Economic and Fiscal Impacts of State-Level Immigration Policies

A Cost-Benefit Framework for Analyzing the Economic and Fiscal Impacts of State-Level Immigration Policies

Published Mar 8, 2016

by Lynn A. Karoly, Francisco Perez-Arce

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Research Questions

  1. What are the key state-level immigration-related policies focused on unauthorized immigration, and what variations are there?
  2. What are the potential impacts of specific state-level policies and how do they vary across stakeholders?
  3. Is there an evidence base in the existing research that confirms the expected impacts?
  4. How comprehensive are existing studies of the costs and benefits of these policies?

Traditionally, immigration policy has been a federal responsibility but, in the past decade, states have begun to adopt policies through legislation and other actions to respond to trends in unauthorized immigration. Some states have adopted restrictive policies toward unauthorized immigrants, such as expanding state and local enforcement of immigration laws, requiring employers to verify employment eligibility, and precluding access to driver's licenses or in-state tuition for public higher education. Other states have adopted policies that are unrestrictive — for example, making driver's licenses and in-state tuition available regardless of immigration status. The expanding role of states in these areas of policy raises questions about the consequences of state-level action for various stakeholders in the public and private sectors. This report features a cost-benefit framework for classifying the potential impacts of specific state-level immigration-related policies, identifying the potential domains of impact and how different stakeholders in the public and private sectors would be affected. The authors also review research literature to identify empirical evidence, where it exists, regarding the likely magnitudes of the impacts of specific state-level immigration-related policies, and use the cost-benefit framework, together with the assembled empirical evidence, to assess the rigor and relevance of existing studies of the fiscal and economic impacts of specific state-level immigration policy actions. This study should be of interest to policymakers at all levels of government, as well stakeholders in the private sector, focused on state-level immigration policy and the costs and benefits associated with state policy actions pertaining to unauthorized immigrants.

Key Findings

State-Level Immigration Policies May Produce Impacts in Multiple Domains

  • State-level immigration-related policies are typically motivated by concerns for the size of the unauthorized immigrant population in a state, competition in the labor market, and the use of public services by unauthorized immigrants, among other impacts of unauthorized immigration.
  • Theoretical predictions and empirical findings indicate that, depending on the policy, impacts may be found across the board, from state economic activity to population health and utilization of health care.

Some Expected Effects Have a Clear Direction of Impact; Others Are More Uncertain

  • In the case of policies that are restrictive toward unauthorized immigrants, the first-order effects for the unauthorized immigrant population are typically unfavorable (i.e., costs exceed benefits) and the reverse holds when policies are unrestrictive.
  • Other outcomes, typically second-order effects through changes in labor supply or labor demand, are less certain in terms of their expect net benefits.
  • Given these uncertainties in the policy impacts, it is important to undertake empirical research to assess the realized outcomes for unauthorized immigrants and other population groups in states adopting immigration-related policies relative to those that do not.

Expected Effects Often Go Beyond Those for Unauthorized Immigrants to Include Potential Spillover Effects for Other Stakeholders

  • In each of the policy areas considered, potential impacts were identified for authorized immigrants and natives (including the U.S. citizen children of unauthorized immigrant parents) that were often unintended and theoretically ambiguous in terms of their net effect.
  • To the extent that state-level immigration policies also affect state and local governments (or even the federal government), those effects ultimately affect nontargeted populations as taxpayers or recipients of government services.

A Growing Literature Documents the Effects of State-Level Policies But Important Gaps Remain

  • As the volume of state-level immigration-related policies has expanded, there has been growth in the number of research studies that seek to measure the causal effects of the policies.
  • Although few formal cost-benefit analyses of state-level immigration policies have been conducted, they can inform overall economic and fiscal impacts, as well as distributional consequences.
  • Predominance of certain state policies may reflect underlying cost-benefit calculations.

This study was funded through a grant from the John D. and Catherine T. MacArthur Foundation and conducted by RAND Labor and Population.

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