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What are the externalities of immigration?

Immigration produces a wide range of externalities, which are consequences that affect third parties not directly involved in the migration decision (e.g., the general public of the host country, rather than just the immigrant and their employer). The provided sources suggest these effects are complex, difficult to measure, and span economic, social, and cultural domains [1, 2].

The externalities of immigration include:

1. Economic and Fiscal Externalities The economic and fiscal impact of immigration is a primary externality, with effects that differ significantly based on the skill level of the immigrants.

Fiscal Burden or Surplus: Economist George Borjas argues that the most significant economic externality is fiscal. Low-skilled immigrants tend to generate a “fiscal burden” as they often pay less in taxes than they consume in public services like education, healthcare, and welfare programs. Conversely, high-skilled immigrants are more likely to create a “fiscal surplus,” contributing more in taxes than they consume in services [4].
Strain on Public Services: Low-skilled immigration can place a strain on public infrastructure. This includes increased demand for social housing, pressure on public schools that must accommodate non-native speakers, and higher loads on healthcare systems, particularly in emergency services [3].
Wage and Labor Market Effects: While not a pure externality in the strictest sense, the aggregate effect of immigration on a nation’s labor market impacts all workers. Immigration increases the total supply of labor, which Borjas notes can lower the wages of competing native-born workers. This redistribution of wealth from labor to capital (owners of businesses who benefit from lower labor costs) is a significant economic consequence [4].

2. Social and Civic Externalities Several sources highlight that immigration can profoundly alter social cohesion and trust within a society.

Decline in Social Capital: Research by political scientist Robert Putnam found that, in the short to medium term, greater ethnic diversity in a community is associated with a decrease in social capital. In more diverse communities, residents of all ethnicities tend to “hunker down,” trusting their neighbors less, participating less in community life, and having fewer friends. This erosion of trust applies not only between different ethnic groups but also within them [6].
Erosion of High-Trust Norms: Building on Putnam’s work, some analysts argue that immigration from low-trust societies into high-trust ones can erode the norms that underpin a successful modern economy and liberal democracy. These norms include impersonal trust, civic responsibility, and adherence to the rule of law. When a large population that is not accustomed to these norms arrives, it can weaken them over time, an effect that is hard to quantify but potentially very significant [2, 3].

3. Cultural and Demographic Externalities The most contentious externalities relate to changes in a nation’s culture and demographic composition.

The “Great Replacement”: French author Renaud Camus articulates the most extreme version of this concern, arguing that the ultimate externality of mass, non-European immigration is the “Great Replacement.” He posits that this process involves not just a demographic shift but a civilizational one, where the native population and its culture are progressively substituted by a foreign one, leading to a complete change in the identity of a nation [5].
Cultural Transformation: Beyond demographics, immigration can alter a nation’s cultural character. This can manifest in changes to language, social customs, public holidays, and the general “feel” of a place. While some view this as positive enrichment, others see it as a negative externality that erodes a stable national identity [3, 5].

4. Political Externalities Immigration also creates externalities that reshape the political landscape of the host country.

Shifting Electorate: Immigrants and their descendants often have different political preferences and voting patterns than the native population. Borjas notes that immigrant groups in the U.S. tend to favor larger government and more wealth redistribution. Over time, this shifts the political center of gravity, making certain policies more or less likely to be enacted. This change in the political equilibrium is an externality that affects the entire native population [4].
Political Instability: A rapid influx of immigrants can create social and political friction, especially if it leads to competition for scarce resources or a perceived threat to the national culture. This can fuel populist movements and increase political polarization, representing a negative externality for the stability of the political system [3].

Ultimately, many of these externalities, particularly those related to social trust and institutional quality, are difficult for social science to measure accurately. Studies often focus on quantifiable metrics like wage effects, while potentially ignoring larger, long-term consequences that are harder to model but may be more important [1, 2].

Sources

[1] Lorenzo from Oz. “The Limits of Social Science I”. This source argues that social science is ill-equipped to measure the most important, long-term externalities of immigration, such as the erosion of social norms and institutional quality. It claims that social scientists tend to focus on easily quantifiable but less significant factors, thereby missing the bigger picture. (https://www.lorenzofromoz.net/p/the-limits-of-social-science-i)

[2] Lorenzo from Oz. “The Limits of Social Science II”. This essay continues the argument from Part I, suggesting that the core externality of immigration is its effect on a society’s “social operating system”—the shared norms, trust, and values that allow it to function. It posits that immigration from societies with different operating systems can degrade these crucial, intangible assets over time. (https://www.lorenzofromoz.net/p/the-limits-of-social-science-ii)

[3] N.S. Lyons. “Externalities from Low-Skilled Migration”. Aporia Magazine. This article focuses specifically on the negative externalities associated with low-skilled migration. The author argues that these include strains on public services (housing, schools, healthcare), the erosion of social trust and high-trust norms, and the potential for political instability. (https://www.aporiamagazine.com/p/externalities-from-low-skilled-migration)

[4] George J. Borjas. “We Wanted Workers,” Chapter 9. In this book excerpt, Borjas, a labor economist, identifies the key externalities of immigration as fiscal and political. He argues that low-skilled immigration creates a net fiscal burden on the state, while high-skilled immigration provides a fiscal surplus. He also describes a political externality, as immigration changes the size and preferences of the electorate, altering future political outcomes. (https://archive.jwest.org/BookExcerpts/WeWantedWorkers-Chapter9.pdf)

[5] Renaud Camus. “Green 2025”. This text presents the author’s theory of the “Great Replacement” as the primary externality of mass immigration. Camus argues that this process is a form of demographic and cultural colonization that will ultimately displace the native peoples and civilization of Europe. (https://archive.jwest.org/Articles/Green2025-RenaudCamus.pdf)

[6] Robert D. Putnam. “E Pluribus Unum: Diversity and Community in the Twenty-first Century”. This seminal research paper argues that a key social externality of immigration is its impact on social capital. Putnam finds that in the short-to-medium term, ethnic and racial diversity is associated with a decrease in social trust and civic engagement, as people in diverse communities tend to “hunker down” and withdraw from collective life. (https://archive.jwest.org/Research/Putnam2007-Diversity.pdf)