Local labor markets and the persistence of population shocks: evidence from West Germany, 1939–1970

Sebastian T Braun, Anica Kramer, Michael Kvasnicka, and Philipp Meier

Journal of Economic Geography, Volume 21, Issue 2 (2021), Pages 231–260



This article examines the population effects of the forced migration of eight million ethnic Germans from Eastern Europe to West Germany after World War II. The population shock occurred unevenly across West Germany counties, ranging from 1.4 percent to 83 percent of pre-war population. The initial settlement pattern of forced migrants reflected the availability of housing and distance from origin rather than economic conditions in settlement locations.

The authors investigate two possible explanations for the spatial distribution of economic activity: (1) the “locational fundamentals” theory, which holds that geographic conditions (e.g. access to a river) determine the spatial distribution of economic activity, and consequently population shocks only have temporary effects; and (2) the “increasing returns” theory, which holds that population density can itself enhance productivity due to agglomeration economies, so that large shocks to the spatial distribution of population could have persistent effects.

Based on commuter flows, the authors define labor market regions (comprising several countries) and exploit the variation in the settlement of forced migrants within and across labor markets. The analysis relies on population and occupation censuses of 1939, 1946, 1950, 1961 and 1970.

Main results:

  • Controlling for the local housing supply, the pattern of settlement of forced migrants across West German counties was unrelated to pre-war trends in population growth.
  • The settlement of forced migrants had a persistent effect on the distribution of population within labor markets.
  • However, the population shock was largely reversed between labor markets. More than 80 percent of the initial shock dissipated 25 years after the war.
  • Variation in expellee inflows between but not within local labor markets is negatively associated with net population flows.

Overall, forced migration had a persistent effect on the spatial distribution of population within local labor markets but had little effect on the distribution between labor markets. The authors argue that migration-induced road infrastructure investments increased the equilibrium size of labor markets but were not large enough for them to fully absorb forced migrants, and consequently, emigration from high- to low-inflow labor markets reversed much, though not all, of the initial population shock. Within labor markets, road infrastructure investments induced suburbanization (urban sprawl), and since forced migrants were already over-represented in the periphery, their inflow did not necessitate re-adjustment within labor markets.

The authors conclude that the choice of spatial units can significantly affect the estimated persistence of population shocks and help to explain the disparate results in the empirical literature on the persistence of population shocks.