The Ukrainian refugees
The war in Ukraine caused more than 7 million refugees, with more than 4 million working-age refugees of different skills, to migrate across Europe, with the Ukraine’s neighboring countries experiencing the largest inflow. To study the macroeconomic impact of such refugee inflow, Caliendo et al. develop a dynamic trade and migration model with an endogenous process of capital accumulation. The model comprises 23 European countries and a constructed rest of the world. Production of goods requires high-skilled and low-skilled labor, capital structures, and countries trade goods subject to bilateral trade costs. Households, make forward-looking migration decisions and decide optimally where to locate each period subject to mobility frictions and idiosyncratic taste shocks. Capitalists decide the optimal stock of capital each period to maximize the present discounted value of their consumption. The authors test the model by using data from the European Labor Force Survey (EU-LFS), and production and trade data from the World Input-Output Database (WIOD). Information on Ukrainian refugees by skill, age, employment status, and country of destination is taken from the United Nations High Commissioner for Refugees (UNHCR). They find that:
- The inflow of Ukrainian refugees increases aggregate real GDP in Europe in the long term.
- High-skilled households are worse off with the increased competition from a labor supply shock that is relatively high-skilled intensive.
- Low-skilled households tend to benefit from the relatively larger increase in high-skilled labor and from the accumulation of capital structures over time, and household income inequality declines across European countries as a result.
- The ability of a country to build capital structures plays an important role in shaping the aggregate and distributional effects of the labor supply shock. Capital accumulation across European countries in response to the labor supply shock leads to an increase in output, and can reduce the welfare losses of high-skilled households and benefit low-skilled households.
Labor Supply Shocks and Capital Accumulation: The Short and Long Run Effects of the Refugee Crisis in Europe
Authors: Lorenzo Caliendo, Luca David Opromolla, Fernando Parro, Alessandro Sforza
From: Yale University, North Carolina State University, Pennsylvania State University, University of Bologna
The Mediterranean refugees
Before the war in Ukraine, Europe was dealing with an increased inflow of asylum refugees due to the Syrian war. In this paper, Di Iasio and Wahba examine the determinants of the destination choice of first-time non-EU asylum applicants to the EU, between 2008-2020. In particular, they investigate the role played by policies related to employment rights, processing of asylum applications, the attractiveness of the welfare system, economic factors, and networks on the destination of asylum seekers within the EU.
We find that the strongest pull factor for asylum seekers to a destination is social networks, both in terms of previous asylum applicants as well as stock of previous migrants. The results suggest that economic factors are not as important and that asylum seekers are not as attracted by the generosity of welfare state as by social networks. Our findings also suggest that the removal of employment bans would have little impact on the number of asylum seekers given their modest correlation with asylum flows. Finally, our results also highlight the positive association between recognition rate and asylum applications.
The Determinants of Refugees’ Destinations: Where Do Refugees Locate within the EU?
Authors: Valentina Di Iasio, Jackline Wahba
From: University of Southampton
