The Effect of Social Networks on Migrants’ Labor Market Integration: A Quasi-Experiment (joint work with Klarita Gërxhani)

Empirically identifying the causal effect of social ties on migrants’ economic prospects is a challenging task. The ethnic social homophily argument predicts the non-random sorting of migrants into locations with greater opportunities for (previous) connections. We address endogeneity and self-selection issues by relying on a quasi-experiment distilled from a rich dataset of the IAB-SOEP Migration Sample. The experiment builds on the random residential allocation of various migrant groups by German authorities, minimizing the role of pre-existing social ties in migrants’ inflow. Our analyses are based on a random sample and a non-random sample, which were determined according to whether refugees and other migrants reported being subject to allocation policies. The empirical results obtained from these samples imply that the failure to control for potential (unobserved) confounders in the observational studies “pulls” the observed association between job-related social ties and migrants’ labor market outcomes away from the true association. Consequently, the effect of job-related social ties on migrants’ labor market entry is overestimated, and the effect on wages in their first jobs is concealed. Caution is warranted when interpreting previous results on the role of social ties in migration outcomes.

Keywords: social ties, refugees, first-generation migrants, labor market, quasi-experiment

Discussion Paper


Does free movement of workers boost immigrant employment? New evidence from the German case (joint work with Herbert Brücker)

We study how the introduction of free movement of workers (FMW) for citizens from countries participating in the Common Single Market affected migrants’ labour market integration in Germany. We focus on two complex issues: Firstly, whether and how FMW impacted on the composition of the migrant population in terms of human capital characteristics such as qualification, language proficiency, cognitive abilities, and professional experience. Secondly, we analyse whether and how FMW affected migrants’ labour market integration as measured by the duration of getting the first job. Exploiting rich longitudinal data from the IAB-SOEP migration sample, we identify FMW effects on migrants’ outcomes by imitating a regression discontinuity design. Findings reveal that the introduction of the FMW indeed had a substantial impact on the composition of the migrant population in form of a higher influx of skilled and educated workforce. Moreover, the results imply that FMW improved migrants’ labour market integration when measured by the probability of first job entry one year after arrival to Germany significantly. Overall, our findings suggest that FMV increased welfare by (i) raising the scale of migration and the skill level of migrants, and (ii) reducing the waiting-time for labour market integration and, hence, the unemployment rate of new arrivals.

Keywords: free movement of workers, EU, migration, transition rate, regression discontinuity, inverse-probability-matching.