Abstract
In this paper we estimate the causal impact of immigration to Italy on local public finances, at the municipality level, between 2008 and 2015. We find that immigrants lead to an improvement in the fiscal conditions of local governments (Comuni). Total (current plus capital) revenues increase while total expenditures are not affected, giving rise to a decrease in the deficit of the municipality, when immigrants arrive (all outcome variables in the paper are defined in per capita terms). Current revenues increase, which allows local governments to spend more on provision of local public goods paid by current expenditures. In particular, the arrival of immigrants increases property tax revenues, fees and other revenues, as well as transfers from other levels of government. We show that there is an increase in property tax revenues from “secondary residences,” which are often rented out and are subject to higher taxation compared to owner-occupied units. On the expenditure side, immigrant inflows lead to greater per capita spending on various items such as: garbage collection, local police, culture and religion, and transport.