The authors exploit the large and geographically varying inflow of over 2.5 million Syrian migrants into Turkey between 2012 and 2015 to study the effect of forced migration on host local economies in Turkey, including employment and wage effects on native workers. More than 90 percent of Syrian refugees do not have a high school degree; they cannot work formally and therefore pursue work in the informal sector. The authors find:
- No evidence of an employment decline for natives without a high school diploma.
- Average wages in the informal sector declined by more than 10 percent.
- However, there is no effect on the average wages of natives without a high school diploma, due to an increase in formal employment for this group.
- Workers with at least a high school degree have benefited from the inflow of Syrian refugees; their wages have increased by 5.7 percent.
There have been several demand side effects of the Syrian refugee inflow that helped offset the impact of a labor supply shock:
- Turkish workers’ participation in the formal sector rose in response to the inflow of Syrian refugees, consistent with complementarity of migrants and native-born workers.
- Forced migration led to an increase in residential building construction (new dwelling units increasing by more than 34 percent).
- Syrian refugees brought capital and entrepreneurs to the host regions, spurring new business creation. The number of new companies increased by more than 24 percent, including Syrian-founded and non-Syrian founded companies.
The authors conclude that migration-induced increases in regional demand and capital supply enable local labor markets to absorb inflow of migrant labor, and prevent sizable wage decline or job loss for native workers.