Networks and Immigrants' Economic Success

• In Event: Elite Mobility and Highly Skilled Migration

Abstract

More than 1 million applied for asylum in the EU in 2015. Given that immigrants often live geographically concentrated in "ethnic enclaves", this has caused concerns about increased levels of segregation. In 2015 German Chancellor Angela Merkel declared that "those who seek refuge with us also have to respect our laws and traditions, and learn to speak German'' and concluded that "multiculturalism leads to parallel societies, and therefore multiculturalism remains a grand delusion'' (the Guardian, 2015). The belief that living in an enclave of co-nationals hinder integration, by making it more difficult for immigrants to acquire the host countries' language and norms, is widespread. In fact, several countries employ policies specifically designed to geographically disperse immigrants. In Germany asylum seekers loose their financial support if they leave the federal state they were initially assigned to, in Switzerland asylum seekers are not allowed to move from their assigned canton during the first years, and in Sweden those who are unable to find housing on their own are geographically dispersed through public housing assistance, although they are free to move later on. Yet, there is little empirical evidence of the consequences of living in ethnic clusters. Enclaves of co-nationals can, potentially, also entail benefits. Previous research suggests that co-ethnics form social networks (e.g. Habyarimana et al., 2007; Algan et al., 2016), and networks are important in the labor market by reducing search costs and problems with asymmetric information (e.g. Munshi, 2003; Bayer et al. 2008). Hence, it is possible that enclaves also give immigrants access to networks that provide information about job openings and job referrals. This paper addresses two questions. First, do enclaves of co-nationals improve or impede immigrants' employment opportunities? If so, does the characteristics of the enclave matter (measured by the degree of ethnic, religious, and linguistic fractionalization among co-nationals)?

Asylum seekers in Switzerland are allocated to the cantons according to specific quotas (proportional to the population). They are not able to leave the canton until they get a temporary residence permit, and on average it takes 2 years to get a first decision (which can be appealed). Even after receiving a permit it is typically hard to change canton for individuals without a permanent residence permit. The number of co-nationals will vary depending on what canton an asylum seeker is assigned to. The allocation to cantons is done manually by the headquarter of the State Secretariat of Migration (SEM), without any personal interaction with the asylum applicants. We utilize a unique data set from the SEM covering all asylum claims 1994-2015. The data contains comprehensive information on background characteristics (such as age, gender, ethnicity, religion, and language), as well as case characteristics (e.g. date of arrival, reception center, assignment canton, and decision). Importantly, SEM also collects information on the number of days individuals have been employed during a given year. The data base contains yearly updates of the immigrants until they either leave the country or receive a permanent resident permit. We combine this information with population wide data on country of citizenship and residence canton for all immigrants in Switzerland. Since we have access to the same database as the SEM headquarter, we observe the applicant information that is available to the officer in charge of assigning asylum applicants to cantons. Hence, controlling for these individual characteristics as well as canton fixed effects minimizes issues with omitted variable bias, and any differences in employment levels can be ascribed to differences in the number of co-nationals.

We find that enclaves of co-nationals have small, but positive effects on immigrants' employment levels. The effect of a 10 % increase of the number of co-nationals corresponds to 1.7 % of the average employment level in the first year. Moreover, these effects are reduced by the degree of linguistic heterogeneity among the co-nationals. For the most fractionalized countries, the effect is reduced by at least 50 %. We interpret the results as confirming the hypothesis that enclaves of co-nationals provide social networks that facilitates job referrals and information about job vacancies. The fact that ethnic and religious fractionalization appears to be less important than linguistic heterogeneity is possibly due to the fact that language creates a substantial barrier for social interaction.

Authors

• Linna Marten, Stanford University

• Jens Hainmueller, Stanford University

• Dominik Hangartner, London School of Economics