Joan Monras and I have been working on a paper that presents a comprehensive documentation of the labor market consequences of refugee supply shocks; the working paper version is here. We examine four episodes:
- The Mariel supply shock in 1980.
- The Soviet émigrés who moved to Israel in the early 1990s after the collapse of the Soviet Union
- The influx of French repatriates and Algerian nationals into France at the end of the Algerian War of Independence in 1962.
- The flow of refugees into several European countries from the many conflicts that made up the Yugoslav Wars of the 1990s.
The paper differs in two key ways from what’s been done before. First, rather than “pick and choose” a different methodological approach to examine each of the four shocks, we use the same regression model, derived from economic theory, to measure the labor market impact. Second, we estimate not only the “own effect” of the refugees on competing natives, but also the “cross effects” of the refugees on complementary natives. So, for example, existing studies of the impact of the very low-skill Marielitos look at what happened to the earnings of native high school dropouts. But what about the earnings of more skilled Miamians? Similarly, existing studies of the impact of the very high-skill Soviet émigrés in Israel look at what happened to the earnings of Israeli college graduates. But what about the earnings of lower-skilled Israelis?
Here’s what we find:
The evidence reveals a common thread that confirms key insights of the canonical model of a competitive labor market: Exogenous supply shocks adversely affect the labor market opportunities of competing natives in the receiving countries, and often have a favorable impact on complementary workers. In short, refugee flows can have large distributional consequences.
We will be presenting the paper in Florence at the 64th Panel Meeting of Economic Policy in October 2016.