Decomposing Welfare Wedges: An Analysis of Welfare Dependence of Immigrants and Natives in Europe

Summary We study the reasons for differences in welfare benefit receipt between immigrants and natives in 16 EU countries using Oaxaca‐Blinder decompositions of a Heckman model. Differences in welfare benefit receipt diminish or disappear altogether after controlling for differences in characteristics of the two groups. The largest part of this is explained by differences in benefit take‐up rather than benefit levels conditional on benefit receipt. The characteristics contributing most to native–immigrant welfare wedges in contributory benefits are differences in age. For non‐contributory benefits, differences in household size and composition are most important. Overall results thus suggest a limited capability of selective immigration policies to reduce welfare benefit receipt among immigrants.