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Reducing Income Transfers to Refugee Immigrants: Does Starthelp Help You Start?

Author

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  • Rosholm, Michael

    () (Aarhus University)

  • Vejlin, Rune Majlund

    () (Aarhus University)

Abstract

In this paper we estimate the causal effect of lowering the public income transfers administered to newly arrived refugee immigrants in Denmark – the so-called starthelp – using a competing risk mixed proportional hazard framework. The two competing risks are exit to job and exit out of the labour force. A standard search model predicts that lower benefits decrease the reservation wage and/or increase the search effort. However, newly arrived refugee immigrants may initially have a weak position in the labour market due to the fact that they do not know the language and typically have no education, or alternatively, their education is not recognized in Denmark. Hence, there may be no demand for their skills. The empirical question addressed here is whether lower benefits affect their job finding rate; if no employer wants to hire them at the going minimum wage, the fact that the reservation wage is lowered may have little effect. For identification we use a ‘quasi-natural’ experiment, in which the rules for welfare benefits in Denmark changed rather dramatically. Refugee immigrants obtaining residence permit before July 1st 2002 received and continue to receive larger income transfers than those obtaining their residence permit after July 1st. We find that lowering public income transfers has a small positive effect on the job finding rate, once calendar time effects are introduced into the model. However, introducing time-variation in the effect, we find that most of the positive effect stems from a large positive effect after two years in Denmark. We also find that the exit rate from the labour force is positively affected by lower transfers, but here the effect is large during the first year in the host country, and then it declines. Furthermore, we investigate heterogeneous treatment effects, and we find, generally, that those which we consider the weakest in the labour market are close to being immune to this treatment.

Suggested Citation

  • Rosholm, Michael & Vejlin, Rune Majlund, 2007. "Reducing Income Transfers to Refugee Immigrants: Does Starthelp Help You Start?," IZA Discussion Papers 2720, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp2720
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    References listed on IDEAS

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    1. Rosholm, Michael & Vejlin, Rune, 2010. "Reducing income transfers to refugee immigrants: Does start-help help you start?," Labour Economics, Elsevier, vol. 17(1), pages 258-275, January.
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    Cited by:

    1. Rosholm, Michael & Vejlin, Rune, 2010. "Reducing income transfers to refugee immigrants: Does start-help help you start?," Labour Economics, Elsevier, vol. 17(1), pages 258-275, January.
    2. Peder J. Pedersen, 2011. "Social and Labor Market Integration of Ethnic Minorities in Denmark," Chapters,in: Ethnic Diversity in European Labor Markets, chapter 4 Edward Elgar Publishing.
    3. Peder J. Pedersen, 2013. "Immigration and welfare state cash benefits: the Danish case," International Journal of Manpower, Emerald Group Publishing, vol. 34(2), pages 113-125, May.
    4. Aldashev, Alisher & Thomsen, Stephan L. & Walter, Thomas, 2010. "Short-term training programs for immigrants: do effects differ from natives and why?," ZEW Discussion Papers 10-021, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    5. Jakobsen, Kristian Thor & Kaarsen, Nicolai & Vasiljeva, Kristine, 2016. "Does reduced cash beneit worsen educational outcomes of refugee children?," MPRA Paper 72008, University Library of Munich, Germany.
    6. Matti Sarvimaki & Kari Hamalainen, 2010. "Assimilating Immigrants: The Impact of an Integration Program," CReAM Discussion Paper Series 1019, Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London.

    More about this item

    Keywords

    quasi-natural experiment; economic incentives; refugee immigrants; duration model;

    JEL classification:

    • E64 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Incomes Policy; Price Policy
    • J18 - Labor and Demographic Economics - - Demographic Economics - - - Public Policy
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • J58 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Public Policy
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings
    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy

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