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Immigration from Mexico and Local Fiscal Policy in the United States


Prominent social psychological and economic theories link ethnic diversity and low-skilled immigration to reduced provision of public goods. Both the level of ethnic diversity and the presence of low-skilled immigrants have increased dramatically in the United States since the 1960s. Immigration from Mexico has been the largest and most persistent driver of these demographic shifts. This dissertation theorizes and then explores empirically whether and how Mexican immigration has influenced local fiscal policy and related public preferences. Applying a new instrumental variables design, it finds little evidence that Mexican immigration has eroded local government spending on public goods or reduced tax receipts, though there is evidence that it has substantially increased the level of public debt. Subsequent chapters turn to explaining why Mexican immigration did not erode public goods spending as predicted. Leveraging the shock in the rate of naturalization among Mexican immigrants that followed the 1986 Immigration Reform and Control Act's legalization program, it argues that the acquisition of citizenship by Mexican immigrants helps explain non-negative effects of Mexican immigration on public goods provision and taxation. On the other hand, an analysis of 2006-2012 national survey data reveals that Mexican immigration does induce natives to express less support for public goods spending and taxation and less support for progressive taxation in particular. These findings suggest that while Mexican immigration does erode public support for the provision of public goods, these changes in public opinion do not in turn translate straightforwardly into the policy changes predicted in much of the literature on ethnic diversity and public goods. Finally, there is evidence that Mexican immigration increases mass polarization by heightening constraint between ideological identification, immigration policy preferences, and preferences over budgetary policy.

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