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Refugee Benefit Cuts

CIREQ-McGill Seminar 2020-2021
joint with the Department of Economics, McGill University

Organizer : Fernando Saltiel (McGill University)

* Please contact the organizer if you would like access.



RÉSUMÉ : This paper studies Denmark’s Start Aid welfare reform, which lowered benefits to refugee immigrants granted residency after the reform date by 40%. The reform induced a sharp immediate increase in labor earnings and employment, but also a strong female labor force withdrawal due to disincentives imbedded in the policy. Moreover, the benefit reduction resulted in large reductions in average disposable income and increased crime among adults of both genders and among adolescents. Exploiting the quasi-random allocation of refugees across municipalities with different local labor demand, we show substantial heterogeneity in the persistence and magnitude of the welfare reform’s effects on both employment, job stability, and public expenditures to the immigrants.

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