Quasi-experimental impact estimates of immigrant labor supply shocks: the role of treatment and comparison group matching and relative skill composition

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Official URL: http://dx.doi.org/10.1016/j.euroecorev.2017.07.005

This paper examines the employment effects of a large burst of immigration—the politically-driven exodus of ethnic Turks from Bulgaria into Turkey in 1989. In some locations, the rise in the labor force due to this inflow of repatriates was 5–10%. The strong involvement of the Turkish state in the settlement of earlier waves of repatriates provides us a strong source of exogenous variation in the 1989 immigrant shock across locations and brings our study closer to an ideal natural experiment. We find that a 1% increase in the labor force due to repatriates increases the unemployment rate of native men by about 0.3 percentage points 14 months after the end of the repatriate flow. When the analysis is done according to skill groups, the impact on non-repatriates is the strongest among the young and those with similar educational attainment to repatriates. Using a reservoir of 342 cities and towns with variable treatment intensity, we also construct a matched sample that is well balanced in terms of covariate distributions of the treatment and comparison groups—using propensity score matching. Using this methodology, we demonstrate the importance of constructing well-matched samples prior to IV estimation—which leads to impact estimates that are more than 50% higher than those with the baseline sample.