The Immigrant Welfare Effect: Take-Up or Eligibility?

Are immigrants on welfare because they are more likely to be eligible or because they are\nmore likely to claim benefits for which they are eligible? The answer is politically important,\nbut because most current research on immigration and welfare is based on data from the\nU.S., the answer is difficult due to the complexities of the transfer system which make\neligibility determinations difficult. In Germany, by contrast, eligibility for the main cash\ntransfer program, Sozialhilfe (Social Assistance), is determined by a comparatively simple\nnation-wide formula. We use data from the German Socio-Economic Panel to test whether\nimmigrants to Germany are more likely than natives to claim welfare benefits for which they\nare eligible. We find that immigrants are more likely than native Germans to receive welfare,\nboth because immigrants are more likely to be eligible, and because they are more likely,\nwhen eligible, to claim their benefits. However, we also find that this greater propensity to\ntake-up benefits is not related to immigrant status per se: when other socio-demographic\nfactors are accounted for in an appropriate manner, immigrant households are no more likely\nto take up benefits than native households.