Labor Market Integration, Local Conditions and Inequalities

Abstract

The paper examines the patterns of economic integration of refugees in Switzerland, a country with a long tradition of hosting refugees, a top-receiving host in Europe, and a prominent example of a multicultural society. It relies on a unique longitudinal dataset consisting of administrative records and social security data for the universe of refugees in Switzerland over 1998–2018. This data is used to reconstruct the individual-level trajectories of refugees and to follow them since arrival over the life-cycle. The study documents the patterns of labor-market integration, and highlights the heterogeneity by gender and age at arrival. Refugees’ labor-market performance is compared to natives’ and other groups of migrants’ labor-market performance. The empirical analysis exploits the government dispersal policy in place since 1998, which consists of the random allocation of refugees across cantons, to identify the causal effects of the local initial conditions. The study finds that higher unemployment rates at arrival slow down the integration process, whereas the existence of a co-ethnic network does not consistently lead to a faster integration. It is shown that in locations where refugees face relatively more hostile attitudes by natives upon arrival, they integrate at a faster pace, probably due to a greater effort undertaken in environments that are more hostile. Together these results, highlight the importance of an early entry in the labor market of the host country, and the need to take a longer run perspective when examining the effectiveness of policies, as the effects may vary over time and different complementary interventions may be needed in the short vs. long-run.