Local Welfare Benefits and Immigrant Settlement: Evidence from Switzerland

Abstract

To what extent does the generosity of local welfare benefits shape the residential choices of immigrants? From a theoretical perspective the expectation is well-established: as rational actors, migrants should relocate to municipalities with higher benefits, given sufficient information and low transaction costs. However the empirical evidence is mixed, largely because existing approaches lack individual-level data and exogeneous variation in local welfare benefits. In this study, we draw on registry data from Switzerland, which cover movement patterns for the full population of foreign residents. By leveraging widespread municipal variation in the generosity of cash transfers and exogenous shocks to benefit rates resulting from cantonal legislation, our design permits us to concretely identify the extent to which changes in benefit rates shape immigrants’ relocation decisions. Our findings have important implications in the European setting, where municipalities often possess discretion over welfare programs and where right-wing parties have been mobilizing voters around the issue of benefit tourism.

Type
Preprint
Publication
(Working Paper)