Refugee Benefit Cuts

To test whether any differential allocation is observed across the reform, we next include a reform dummy (indicating whether the refugee received residency before or after the reform), and the running variables on each side of the reform in columns 2, 6, and 10 of the table. [...] A simple plot (available on request) of the fraction of last-arriving males who are not in the labor force increase is close to 0 for those who received residency in the months leading up to the reform and 10-15% for those who received residency in the months after the reform. [...] Thus, while the reform induces substantial labor supply responses in the first two years after its implementation, the reform’s average effects appear to dissipate in the longer run.34 However, as we will show in the next section, this results masks substantial and significant heterogeneity in the effects of the reform driven by local labor demand differences. [...] To investigate further whether local demand conditions affect the type of jobs individuals take in response to the reform, we next decompose the difference in the reform’s effects between high- and low demand municipalities into effects on employment in unskilled manual work and work that requires some skills (Panel D of Table 5).38 The results show that the differences in inflows are driven by ta. [...] Decomposing the difference of 12.5 percentage points in the 37 The fraction in employment in year t equals the fraction entering employment in year t from non-employment in year t- 1 plus the fraction that continues in employment from year t-1 to year t.