Opportunities or Benefits: Local Conditions and Refugee Labor Market Integration

How does labor demand and the generosity of welfare benefits affect the labor market integration of refugees? We analyze the effect of both factors in a common framework. For identification, we exploit the exogenous placement of refugees in Austria, business cycle fluctuations, and large variation in benefit levels between federal states and type of protection. Higher labor demand at the time of receiving protection status increases employment rates and decreases the likelihood to receive welfare benefits. But the effects are short-lived. Higher benefit levels reduce employment rates initially but the effect is economically small and also temporary. Higher benefit levels also reduce marginal effects of variation in labor demand. Both shocks do not affect the likelihood of remaining in Austria but do affect internal migration.

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