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 expenditures per capita, with more positive net fiscal effects for low-skilled immigrants. These findings stand in contrast to recent evidence from the United States and to the common skill-based narrative that low-skilled immigrants impose disproportionate fiscal pressures on public finances. Overall, the results suggest that the fiscal impacts of immigration at the municipal-level can differ both from those at higher levels of government and across institutional settings, reflecting differences in local institutions and immigration patterns.