Refugee migration, labor demand and local employment

Abstract

  Whether or not immigration negatively affects the labor market outcomes of natives is an ongoing debate. One challenge for empirical evidence is the simultaneity of supply- and demand-side effects. To isolate the demand side, we focus on refugees in Germany who are exogenously allocated to districts and excluded from the labor market. We leverage quasi-random variation in the local refugee share as an instrument to show that an influx of 1000 asylum-seekers creates almost 300 jobs in a district, on average. This effect is mainly driven by a demand for additional (female) labor in service, public administration and social work. The results are robust to various sensitivity checks and an alternative difference-in-differences identification strategy. Moreover, we show that employment effects largely offset the financial burden on the public. Quantifying the demand side of immigration adds to our understanding of local labor market dynamics in an increasingly mobile world.