Heterogeneous Displacement Effects of Migrant Labor Supply

The paper presented in this ZEW Research Seminar provides estimates of the effect of facilitating labor market access for asylum seekers on employment in German counties. We estimate the effect exploiting exogenous variation in the number of eligible asylum seekers subject to a recent and sudden suspension of a major hiring restriction. The policy change allows us to provide evidence from a labor supply shock of migrants on local markets net of additional spending at arrival, which might mask labor market displacement effects. However, we do not find a negative effect on employment growth of natives but only on other foreigners. These results also hold for employees with lower skill levels. Our findings can be interpreted as the consequence of differential substitutability of different subgroups, where asylum seekers are closer substitutes to immigrants than natives even among similar skill levels. Our findings have important implications for policies on labor market access for immigrants.