REPLY TO REVIEW BY GEORGE BORJAS

             In his March, 1991, review in JEL of my 1989 book The

        Economic Consequences of Immigration, George Borjas made a

        factual misstatement which has had ill consequences.  Professor

        Borjas has repeated the same assertion in an article he wrote in

        the National Review (December 13, 1993), and it has been picked

        up by others and published in such places as the New York Times

        (letter by Donald Huddle, January 26, 1994).  So the record needs

        to be set straight here where the wrong assertion was first made.

             Concerning the fiscal costs and benefits of immigration,

        Professor Borjas notes that in my calculations in Chapter 5

        (summarized in Table 5.2) both immigrants and natives on average

        put more into the public coffers than they take out in individual

        public services.  He then assumes that that has led to a wrong

        overall conclusion.

             Probably the most influential result in the book is the
             finding that immigrants contribute more in taxes than
             the value of public services they receive.  Simon then
             concludes that because immigrants more than pay their
             way in the United States, they are not a burden to
             natives...

             In 1975 the typical household in the 1965-1969
             immigrant wave received only $1,941 in social services,
             but paid $3,552 in taxes...Suppose one conducts the
             same type of cost/benefit analysis for the typical
             native family.  Simon then finds that the native
             household receives $2,279 in social services, but pays
             $3,201 in taxes.  It seems that natives, too, are a
             good investment (although not as good an investment as
             immigrants)...It is apparent that key entries in the
             cost/benefit ledger are being left out of the
             calculations" (p. 39).

        He then asserts that my calculation that immigrants are net

        contributors must therefore be wrong since it cannot be true that

        all groups are net contributors.  (That is, on average, as much

        is taken out as is put in, assuming no governmental deficits or

        other pathology).

             Lest there be ambiguity in Borjas's criticism above, he

        states it even more clearly in the National Review (December 13,

        1993, pages 40-43):

             Though the calculation is quite simple, it is also
             quite wrong.  A good hint that something is amiss
             occurs when Simon reports that natives also pay about
             $1,000 more in taxes than they receive in benefits.
             But how can this be?  Welfare programs, after all,
             redistribute income from some groups to others.  If
             both immigrants and natives pay more in taxes than they
             receive in benefits, who is being taxed and who is
             being subsidized?

             Borjas errs in assuming that it is the absolute net

        contribution of immigrants (whose calculation from micro-data,

        like that of natives, inevitably leaves out some non-individual

        governmental services) that is the basis for my analysis.  This

        is not so.  Instead, my analysis rests on the differential

        contribution.  In the example Professor Borjas adduces above, the

        yearly contribution calculated for this cohort of immigrants is

        ($3552 - $1941) - ($3201 - $2279) = $689.  That $689 (with

        adjustment for economies of scale in public goods in some of my

        alternative calculations ) rather than the ($3552 - $1941) =

        $1611 that Borjas focuses on, then becomes the basis for a

        present value analysis of the lifetime effect of a newly-admitted

        immigrant family.

             Hence my calculation is correct, rather than flawed as

        Borjas claims it to be.  And hence it is true, as I asserted,

        that immigrants are on balance net contributors to the public

        coffers.


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