Historical Background—Immigration into Sweden

Hansen and Lofstrom 77 previously in the literature. The self-selection of immigrants coming to a relatively generous welfare state is likely to be one of the reasons for this result. We also find that immigrants reduce welfare-participation rates with time spent in the new coun- try. Although refugees display substantially higher participation rates upon arrival compared to nonrefugee immigrants, they assimilate out of welfare much more rap- idly than their nonrefugee counterparts. We also find that roughly 50 percent of the observed increase in welfare utilization in Sweden in the 1990s can be attributed to the increases in both unemployment and immigration. The result, that immigrants assimilate out of welfare, appears to contradict previ- ous findings in regards to the assimilation of immigrants’ welfare utilization. How- ever, even after 20 years in the host country we find that both refugee and nonrefugee immigrants show significantly higher social-assistance-participation rates than statis- tically similar natives—by between 8 and 10 percentage points. These numbers are quite close to the findings of Borjas and Hilton 1996 and Baker and Benjamin 1995. These results suggest that immigrants in a relatively generous welfare state, like Sweden, display similar welfare participation behavior as immigrants in less generous welfare states, like the United States, relative to natives after having spent some time in the new host country. The paper is organized in the following way. In Sections II and III we give back- ground information about immigration into Sweden and the social assistance pro- gram. Section IV describes the data and variables while Section V depicts trends and differences, between immigrants and natives, in welfare participation. In Section VI we test whether differences in welfare utilization can be explained by differences in socioeconomic characteristics. Assimilation issues are also analyzed in this sec- tion. Finally, we conclude in Section VII.

II. Historical Background—Immigration into Sweden

The inflow of immigrants to Sweden has undergone a number of changes during the last six decades. Figure 1 shows annual immigration to Sweden from 1940 to 1998, both in terms of actual immigrant inflow and inflow expressed as a proportion of the population in the corresponding year. Overall, annual immigra- tion has amounted to about 0.4 percent of the population, but it was notably higher during 1990s. The proportional inflow is slightly higher than the U.S. experience of the 1990s, but quite similar to the experiences of Canada and Australia. Naturally, the large inflow of immigrants has also changed the composition of the population in Sweden. In 1991, almost 10 percent of the Swedish population was born outside Sweden. This is a relatively high figure compared to the United States 7.9 percent, but is lower than the proportion of foreign-born in Canada 16.1 percent and Austra- lia 22.3 percent SOPEMI 1998. The reasons people immigrate to Sweden have changed substantially during the post-war period. In principle, we can distinguish between three categories of immi- grants, based on the reasons for immigration: economic migrants due to the recruit- ment of labor, for example, tied movers based on family ties and refugees. In the late 1940s, a large fraction of the immigrants arrived in Sweden as refugees. In the period from 1950 to 1970, however, most immigrants were recruited by the Swedish 78 The Journal of Human Resources Figure 1 Immigration into Sweden, Annual Inflow and Proportion of Population, 1940–98 Source: Statistics Sweden, Historical Population Development Table, 1999. industry or arrived because of family ties. Since 1970, the proportion of immigrants arriving as refugees has increased significantly, from less than 10 percent of the immigrant inflow in 1970 to about 70 percent in the early 1990s. In 1994, this propor- tion dropped from 70 percent to about 50 percent, mostly due to improved conditions in the Balkan countries.

III. Social Assistance in Sweden