To work or not? Wages or subsidies?: Copula-based evidence of subsidized refugees’ negative selection into employment

Seonho Shin ()
Additional contact information
Seonho Shin: Korea Labor Institute

Empirical Economics, 2022, vol. 63, issue 4, No 19, 2209-2252

Abstract: Abstract Despite increasing interest in topics related to refugees, economic literature has remained mostly silent on how refugees make labor supply decisions in their initial resettlement period, during which their host government provides various care and financial assistance. This paper fills that void by applying the copula-based selection model, which is free from the restrictive joint normality assumption, to a unique, high-dimensional data set of refugees who resettled in the US. Its selection parameter estimates suggest that subsidized refugees negatively select themselves into employment in terms of unobserved wage potential, which, according to the theoretical model, should be attributed primarily to the fact that (i) their reservation wages are rigid due to host-provided, non-labor income and (ii) host country employers discount refugees’ unobserved human capital components substantially. As a result, employed refugees’ wages, all observable factors held constant, are lower than the counterfactual wages of non-employed refugees, which contradicts what is usual in conventional labor markets. This devaluation-based skill paradox is more pronounced in regions unfriendly to refugees, and the negative pattern temporarily reversed immediately after the 9/11 attacks, which represented a huge adverse shock to non-natives in the US labor market, suggesting that subsidized refugees’ labor supply decisions are influenced greatly by their expectations regarding future labor market outcomes. Possible explanations are discussed based on a simple theoretical model in the context of the US refugee resettlement system.

Keywords: Refugee; Labor market; Selection into employment; Copula-based selection model; Economics of minorities (search for similar items in EconPapers)
JEL-codes: J61 J64 J71 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://link.springer.com/10.1007/s00181-022-02202-y Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:empeco:v:63:y:2022:i:4:d:10.1007_s00181-022-02202-y

Ordering information: This journal article can be ordered from
http://www.springer. ... rics/journal/181/PS2

DOI: 10.1007/s00181-022-02202-y

Access Statistics for this article

Empirical Economics is currently edited by Robert M. Kunst, Arthur H.O. van Soest, Bertrand Candelon, Subal C. Kumbhakar and Joakim Westerlund

More articles in Empirical Economics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().