Dennis Egger (University of Oxford)

Effects of Migrant Networks on Labor Market Integration, Local Firms and Employees

Joint with Seminars in Economics

Abstract. We study the effects of migrant networks on the labor market integration of refugees, the performance of local firms, and the wages of their employees in Switzerland. To track outcomes of individuals and firms, we link six employer-employee matched administrative datasets covering the universe of residents (citizens, migrants, and refugees) and registered firms from 2008 to 2017. Leveraging the quasi-random placement of refugees across locations and a novel IV strategy, we show that larger local networks persistently increase employment and income of refugees. Network effects are large, accounting for 38% of the variation in incomes within nationality cohorts across cantons. In line with homophily, demographically similar networks and economically successful peers have larger positive impacts. Network effects are shaped by direct personal contacts: refugees who quasi-randomly lived in the same residential center are three times more likely to become co-workers at the same firm. Using a shift-share IV design, we then show that firms experiencing a positive shock to their employee’s network hire both more migrants and natives. Their wage bill and the average wages of existing employees grow, and high-skilled natives rise within the firm hierarchy. This is consistent with referrals improving firm-worker match quality and productivity. Concerns about adverse economic impacts of spatially concentrated immigration are not borne out in the data, suggesting that existing migration policies in Switzerland and other high-income countries may need to be reconsidered.

Joint with Daniel Auer and Johannes Kunz.