Estimating the Fiscal Impact of Migrant Crisis on National Economy

Abstract

Observing from an economic point of view, without taking into account the ethical and political component of the migrant crisis, arguments about the benefits and risks of large inflow of refugees to a country’s economy, dependent basically on the specifics of the economic environment of the national economy. Tis paper aims to provide an assessment of the potential economic impact of the refugee crisis in Europe, especially on the economy of Bosnia and Herzegovina. In theory, the fiscal effects of immigration largely depend on the characteristics of migrants related to their skills, age, length of stay, and affecting their participation in the labor market and social rights. Estimates of the fiscal impact of immigration are limited by lack of data and accurate information on a broad range of important factors that affect the estimates. For these reasons, the study of effects at this point is based on a number of assumptions that must be taken into account in order to assess the fiscal effects of immigration, and the results tend to change based on these assumptions. Therefore, we conducted a survey on the hypothetical scenario of massive inflow of migrants in BiH, who under these circumstances had the most impact on the fiscal economy.

The research results show that there will be short-term costs arising from such a large migration flows, but for the developed countries of Europe in the long term also be economic benefits, provided that the refugees integrate into the labor market. Should there be a large inflow of migrants in Bosnia and Herzegovina, the impact on our economy would primarily be reflected in the effects on public finances and the labor market. Increased unemployment due to higher labor supply, the growth of the grey economy which would consequently led to a decline in public revenues while increasing public expenditure for expenditures for social rights, and accommodation and reception of refugees, would constitute a significant challenge for the public finances of Bosnia and Herzegovina.