The Impact of Immigration on the Size of Government: Empirical Evidence from Danish Municipalities


  • Christer Gerdes

    1. Stockholm University, SE-10691 Stockholm, Sweden
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    • For comments on earlier drafts, I wish to thank Anders Björklund, Matz Dahlberg, Mikael Lindahl, Anders Stenberg, Eskil Wadensjö, two anonymous referees, and seminar participants at SOFI in 2006, ESPAnet Conference 2006 (Bremen), “Welfare State Feedbacks” 2007 (Aalborg), and APSA 2009 Annual Meeting (Toronto). Financial support from the Rockwool Foundation is gratefully acknowledged.


Several studies have reported a negative relationship between ethnic heterogeneity and the size of the public sector. One problem with this literature is that ethnic composition is hardly exogenous, which obstructs attempts to reveal causal mechanisms. This paper explores the impact of changes in ethnic heterogeneity in Danish municipalities from 1995 through 2001, a period marked by an unprecedented influx of refugees. A state-sponsored placement policy restricted their choice of residence and required local governments to accept them as citizens. The analysis of the impact of this influx has not revealed any support for the claim of a decline in public sector size.