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Labor Supply Shocks and Capital Accumulation: The Short and Long Run Effects of the Refugee Crisis in Europe

Author

Listed:
  • Lorenzo Caliendo
  • Luca David Opromolla
  • Fernando Parro
  • Alessandro Sforza

Abstract

European countries experienced a large increase in labor supply due to the influx of Ukrainian refugees after the 2022 Russia invasion. We study its dynamic effects in a spatial model with forward-looking households of different skills, trade, and endogenous capital accumulation. We find that real GDP increases in Europe in the long term, with large distributional effects across countries and skill groups. In the short run, an increase in the supply of labor strains the use of capital structures that takes time to build. Over time, countries that build capital structures increase output, resulting in potential long run benefits.

Suggested Citation

  • Lorenzo Caliendo & Luca David Opromolla & Fernando Parro & Alessandro Sforza, 2023. "Labor Supply Shocks and Capital Accumulation: The Short and Long Run Effects of the Refugee Crisis in Europe," CESifo Working Paper Series 10236, CESifo.
    • Handle: RePEc:ces:ceswps:_10236
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    References listed on IDEAS

    as
    1. Marcel P. Timmer & Erik Dietzenbacher & Bart Los & Robert Stehrer & Gaaitzen J. Vries, 2015. "An Illustrated User Guide to the World Input–Output Database: the Case of Global Automotive Production," Review of International Economics, Wiley Blackwell, vol. 23(3), pages 575-605, August.
    2. Lorenzo Caliendo & Luca David Opromolla & Fernando Parro & Alessandro Sforza, 2021. "Goods and Factor Market Integration: A Quantitative Assessment of the EU Enlargement," Journal of Political Economy, University of Chicago Press, vol. 129(12), pages 3491-3545.
    3. Lorenzo Caliendo & Maximiliano Dvorkin & Fernando Parro, 2019. "Trade and Labor Market Dynamics: General Equilibrium Analysis of the China Trade Shock," Econometrica, Econometric Society, vol. 87(3), pages 741-835, May.
    4. Erhan Artuç & Shubham Chaudhuri & John McLaren, 2010. "Trade Shocks and Labor Adjustment: A Structural Empirical Approach," American Economic Review, American Economic Association, vol. 100(3), pages 1008-1045, June.
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    JEL classification:

    • F1 - International Economics - - Trade
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions

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