Trading off Welfare and Immigration in Europe

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.