Overview

Objectives
The aim of this project was to review and discuss the major theories and empirical studies about the welfare magnet hypothesis, i.e. whether immigrants are more likely to move to countries with generous welfare systems. While there is a well-established body of literature focusing on the push and pull factors of immigration, such as wage differentials, macroeconomic conditions and social networks, only recently has the topic of “welfare migration” — i.e. whether immigrants are more likely to move to countries with generous welfare systems — generated substantial interest among scholars. This study looked at how the literature has developed and what the major challenges for future research are.

Methods
The study provided an overview of welfare and immigration in a selected group of Member States of the Organisation for Economic Co-operation and Development (OECD), and reviewed major theoretical works that model the relationship between welfare and immigration. These studies predict that welfare programs affect the number, composition and location of immigrants. Two strands of the empirical literature on the welfare magnet hypothesis were then surveyed, where studies on whether immigrants are more likely to be welfare users than natives were examined. Studies on whether immigrants choose countries or regions with generous welfare systems were then reviewed.

Findings
According to the studies reviewed in the project, it is plausible to conclude that fears about immigrant abuse of welfare systems are somewhat unfounded or at least exaggerated. Overall the empirical evidence on the welfare magnet hypothesis is mixed. However when evidence of a magnet effect is found, the impact tends to be rather small.

Two potential sources for the conflicting empirical results were found: the endogeneity of welfare and immigration and whether immigration in the country is free or restricted. It is important to note that welfare is one of the many pull factors of immigration. The study suggests that the number and characteristics of immigrants are potentially affected by not only immigration policies — which are meant to directly affect immigration flows — but also by other policies, such as welfare programs. In addition, characteristics of immigrants directly influenced by immigration policies — such as their skill level — are important determinants of immigrants' welfare use.

How well the two types of policies are integrated will have consequences on the important issues which are at the core of current debate about immigration, such as the sustainability of the welfare systems versus the potential of immigration to alleviate labour shortages and counteract the effects of an ageing population.