Labour market and redistributive consequences of the Syrian refugees in Turkey[‘Blessing or Burden? Impacts of Refugees on Businesses and the Informal Economy’]

This paper analyses the labour market effects and redistributive consequences among natives of the arrival of the Syrian refugees in Turkey. For that, we use the quantitative spatial model developed in Loayza et al. (2021), in which low- and high-skill workers can choose where to live/work and firms within each region can choose to operate in the formal or informal sectors and, if formal, whether to hire their workers formally or not. We use the estimated model to quantify the effects of the ‘refugee shock’ on informality, wages, profits, and tax revenues across regions and the country as a whole. We show that informality increases among low-skill but decreases among high-skill workers and the skill premium increases. Wages of low-skill workers decline substantially in the most affected regions, but tax revenues and profits per worker increase. Redistributing tax revenues can substantially reduce low-skill workers’ losses in most affected areas. In addition, redistributing profits can completely revert both low- and high-skill workers’ losses, even in the most affected regions.