Making the Match: The Importance of Local Labor Markets for the Employment Prospects of Refugees

Abstract

We examine how local labor markets shape the employment prospects of refugees in Germany, where refugees are assigned to regions through a dispersal policy. While it is known that the characteristics of these regions affect the overall employment probability of refugees, previous studies have not investigated how refugees’ chances of regaining their pre-migration occupation are affected by the local opportunities to find employment in these occupations. To address this gap, we use a large survey of refugees in Germany and link local-occupational labor market characteristics to their region of residence and pre-migration occupation. We decompose the effects of these detailed context characteristics by estimating linear probability regressions with and without fixed effects for regions and/or occupations. While our analyses show that the employment probability of refugees is indeed strongly influenced by the general local characteristics of their place of residence and general, nationwide characteristics of their pre-migration occupation, our analyses also show that the chances of refugees being employed in their pre-migration occupation are additionally driven by the local characteristics of their occupation. More specifically, our models reveal that a one standard deviation higher local share of foreigners in refugees’ pre-migration occupation increases the average probability of an occupational match by around 25 percent.