Migration and Post-Conflict Reconstruction: The Effect of Returning Refugees on Export Performance in the Former Yugoslavia

Dany Bahar, Cem Özgüzel, Andreas Hauptmann, Hillel Rapoport

IZA Discussion Paper Series, No. 12412 (2019)




During the first half of the 1990s, Germany received roughly 700,000 refugees fleeing ethnic conflict in the former Yugoslavia. By 2000, the majority of refugees had returned to their home country or territories of the former Yugoslavia. The authors exploit this natural experiment, and the exogenous exposure to German industrial know-how and technology it created, to investigate the role of returning refugees in explaining the export performance of their home countries.

The analysis is based on confidential German social security data capturing the number of Yugoslavian migrants working in a particular industry, disaggregated by product type, who arrived in Germany during the Balkan refugee crisis and returned home after the war; together with standard disaggregated international trade data. The authors employ a difference-in-differences methodology to estimate changes in export values from Yugoslavian countries to the rest of the world caused by return migration of workers who were employed in those same sectors in Germany. To address possible endogeneity due to self-selection of workers into certain industries with high potential in their home countries, the authors employ an instrumental variable approach (instrumenting the actual number of returning workers per industry with their expected number given a spatial dispersal policy that exogenously allocated asylum seekers across the different regions of Germany upon arrival).

Key findings include:

Yugoslavian exports performed significantly better during the post-war period in industries that returnees had worked in while in asylum in Germany. On average, products with a one percent increase in return migration experienced an increase in exports to the rest of the world of 0.08 to 0.24 percent between the pre and post-war periods. The estimated elasticity keeps increasing as time passes after refugees have returned.

Results cannot be explained by existing previous trends in exports or by convergence between the industry structure of the former Yugoslavia in the 2000s and that of Germany in the 1990s.

Robustness tests rule out plausible alternative explanations, such as investment linked to migration or a decrease in information costs linked to international trade due to migrant networks.

Results are driven by knowledge-intensive industries, and by workers with high educational attainment that are in occupations intensive in analytical and cognitive tasks or with managerial characteristics.

Results are stronger when looking at workers who, while abroad, experienced fast wage growth, and were employed by the top paying firms within each industry.

The authors find evidence consistent with the idea that migrant workers exposed to industries in Germany bring back knowhow, knowledge and technologies back home that translates into higher productivity in those same industries, which in turn is reflected in export performance. Certain types of workers and occupations are more suited for diffusing productivity-inducing knowhow across borders and such knowledge transfers matter more in certain industries than in others. The authors conclude that returning refugees, after having been integrated in their host economies’ labor markets, can play a significant role in the post-conflict reconstruction of their home countries upon their return.