Balancing the books: Immigration and local finances in France

This paper studies the effect of immigration on local public finances in France, combining population census data with municipal budget accounts over the period 2007–2017. To address the endogeneity of immigrants’ location choices, I use an instrumental variables strategy based on historical settlement patterns by skill and nationality groups. The results show that immigration has a positive effect on per capita operating net revenues, as well as on both operating revenues and expenditures. Over the period under study, the immigrant share increased on average by 1.38 percentage points, from 8.63% to 10.00%, implying an estimated increase of 2.53% in total operating revenues per capita and 2.45% in total operating expenditures per capita. Immigration is also associated with higher investment activity. Overall, municipalities are able to maintain budgetary balance. Although migration is associated with higher debt levels, improvements in liquidity and self-financing capacity suggest that migration contributes to an expansion of local fiscal capacity.