Two and a half million Syrian refugees, tasks and capital intensity

Yusuf Emre Akgündüz and Huzeyfe Torun

Central Bank of the Republic of Turkey, Working Paper No. 19/23, August 2019

https://www.tcmb.gov.tr/wps/wcm/connect/EN/TCMB+EN/Main+Menu/Publications/Research/Working+Paperss/2019/19-23

Review

This paper examines the impact of the sudden inflow of 2.5 million Syrian refugees into Turkey on the tasks performed by Turkish workers and the intensity of capital
employed by Turkish firms. Most Syrian refugees take low-skilled, manual jobs in the informal sector due to limited access to work permits, language and cultural barriers, and low educational attainment. Despite the unexpected nature of the refugee inflow, refugees’ choice of location may be influenced by the labor market opportunities in hosting regions. To
handle this endogeneity, the authors identify the causal effects of Syrian refugees by using the distance between the hosting cities in Turkey and hometowns in Syria in an instrumental variables approach. The analysis is based on data from the Turkish Household Labor Force Survey, as well as administrative data for all firms in the country containing balance sheets reported for tax purposes.

Key findings:

  • The refugee inflow pushed Turkish employees from manual-intensive jobs towards more complex jobs that involve abstract tasks.
  • There are heterogeneous effects by age and education. Young and highly educated natives move towards higher complexity jobs. Lower educated employees show no significant change in their tasks and also drive the negative effect on native employment—their inability to adjust to tasks that are complementary to Syrian labor inputs may explain why their employment outcomes are negative affected.
  •  On average capital intensity (the ratio of fixed assets to sales) and investment rates (annual percentage change in fixed assets) decline in refugee-hosting
    regions. This decline is concentrated among small manufacturing firms, which other studies have shown drive employment growth.

The authors conclude that low-skilled labor provided by Syrian refugees is a complement to Turkish workers’ abstract tasks and a substitute for Turkish workers’ manual tasks and capital use by Turkish firms. The adjustment to the large-scale refugee shock is rapid, varied for different skill and age groups and affects both labor tasks and capital inputs.

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