Do refugees with better mental health better integrate? Evidence from the Building a New Life in Australia longitudinal survey

Hardly any evidence exists on the effects of mental distress on refugee labor outcomes. We offer the first study on this topic in the context of Australia, one of the host countries with the largest number of refugees per capita in the world. Analyzing the Building a New Life in Australia longitudinal survey, we exploit the variations in traumatic experiences of refugees interacted with post-resettlement time periods to causally identify the impacts of refugee mental health. We find that worse mental health, as measured by a one-standard-deviation increase in the Kessler mental health score, reduces the probability of employment by 11.9% and labor income by 22.8%. These effects appear more pronounced for refugees that newly arrive or are without social networks, but they may be ameliorated with government support. These findings have significant implications for the development of health and labor policies, particularly regarding the integration of refugees within host countries.