The paper examines whether entrepreneurs in the social network of refugees, from the same country of origin, facilitate refugees’ labor-market integration by hiring them in their businesses. The authors analyze the universe of refugee cases without ties to the United States (i.e. without family or friends in the United States) who were resettled there between 2005 and 2010. Refugees without ties to the United States do not decide where they go on arrival in the United States, i.e. refugees do not sort into specific labor markets nor do resettlement agencies place them according to unobserved individual characteristics. The authors address threats to identification due to strategic placement by resettlement agencies (based on the characteristics of the location where they might place refugees). They find that the probability that refugees are employed 90 days after arrival is positively affected by the number of business owners in their network, but negatively affected by the number of those who are employees. At the mean, doubling the number of business owners in the refugee’s network raises the probability that the refugee is employed by about 1.3 percentage points, and doubling the number of employees in the refugee’s network decreases the probability that the refugee is employed by about 4.9 percentage points. This suggests that network members who are entrepreneurs hire refugees in their business, while network members working as employees compete with them, consistent with refugees complementing the former and substituting for the latter. The authors suggest a new policy option to provide business incentives and opportunities to tenured refugees and migrants to both facilitate their self-employment and to ease the labor market integration of newcomers. Additional findings in the paper include:
- Almost a third of refugees (without ties to the Unites States) are employed 90 days after arrival.
- The probability that a refugee is employed 90 days after arrival is positively correlated with the refugee’s level of education, negatively correlated with most “support” variables (e.g. applicant’s access to government cash or medical assistance) and follows an inverse U-shaped pattern over the life cycle.
- Controlling for the level of education, age and other individual-level controls, the greater the number of household members who accompany the refugee, the lower the probability that the refugee is employed after 90 days.