Opportunities or Benefits: Local Conditions and Refugee Labor Market Integration

Abstract

This paper studies how local labor market tightness and welfare benefit levels at the time of receiving protection shape refugees’ labor market integration and location choices. We exploit a sequence of reforms that generated quasi-random variation in benefit levels, together with variation in local labor market tightness across the districts and months in which refugees receive protection. We find that tighter local labor markets raise employment, while more generous benefits slightly reduce it. These employment effects persist for about 2.5 years, but both shocks have lasting impacts on internal migration. Moreover, the negative employment effect of benefits is larger in tighter labor markets. Neither shock affects the probability of emigrating from Austria.