The Impact of Immigration on Local Public Finances: Evidence from Canadian Municipalities

As immigration becomes the primary driver of population growth in many countries, concerns persist regarding its implications for public finances. This paper examines the fiscal impact of immigration at the municipal level in Canada between 2004 and 2022, leveraging high-quality annual immigration data and a shift-share instrumental variables (IV) approach. We find that immigration increases municipal revenues and leads to improved municipal budget balances, which holds even for low-skilled immigrants. These results contrast with recent evidence from the United States, which highlights substantial heterogeneity across immigrant skill groups. We argue that low-skill immigrants to Canada are in fact net fiscal contributors in the municipal context, due to the more complex interactions between municipal budgets and the skill distribution.