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J Popul Econ (2016) 29:657–686
DOI 10.1007/s00148-016-0583-2
ORIGINAL PAPER
Immigration and prices: quasi-experimental evidence
from Syrian refugees in Turkey
Binnur Balkan1 · Semih Tumen1,2
Received: 17 February 2015 / Accepted: 16 January 2016 /
Published online: 15 February 2016
© Springer-Verlag Berlin Heidelberg 2016
Abstract We exploit the regional variation in the unexpected (or forced) inflow of
Syrian refugees as a natural experiment to estimate the impact of immigration on
consumer prices in Turkey. Using a difference-in-differences strategy and a comprehensive data set on the regional prices of CPI items, we find that general level of
consumer prices has declined by approximately 2.5 % due to immigration. Prices of
goods and services have declined in similar magnitudes. We highlight that the channel through which the price declines take place is the informal labor market. Syrian
refugees supply inexpensive informal labor and, thus, substitute the informal native
workers especially in informal-labor intensive sectors. We document that prices in
these sectors have fallen by around 4 %, while the prices in the formal labor-intensive
sectors have almost remained unchanged. Increase in the supply of informal immigrant workers generates labor cost advantages and keeps prices lower in the informal
labor-intensive sectors.
Responsible editor: Klaus F. Zimmermann
Electronic supplementary material The online version of this article
(doi:10.1007/s00148-016-0583-2) contains supplementary material, which is available to authorized
users.
Semih Tumen
semih.tumen@tcmb.gov.tr
Binnur Balkan
binnur.balkan@tcmb.gov.tr
1
Research and Monetary Policy Department, Central Bank of the Republic of Turkey, Istiklal
Cad. No:10, 06100 Ulus, Ankara, Turkey
2
IZA, P.O. Box 7240, 53072 Bonn, Germany
658
B. Balkan, S. Tumen
Keywords Immigration · Consumer prices · Syrian refugees · Natural experiment ·
Informal employment
JEL Classification C21 · E31 · J46 · J61
1 Introduction
Following the outburst of the Syrian Conflict in March 2011, millions of Syrians have
been forced to leave their homes. The conflict has initially generated a huge wave
of internal migration within Syria—mostly toward the Turkish, Lebanese, and Jordanian borders. After the sharp increase in the intensity of conflict in late 2011, the
internal migration wave has changed nature and transformed into a wave of refugees
flowing into the neighboring countries. According to the United Nations (UN) figures, the total number of Syrian refugees in Turkey has reached 1.6 million as of
September 2014.1 The unexpected arrival of a large number of refugees due to the
Syrian Conflict resembles a natural experiment that generates an almost exogenous
flow of immigrants, which offers a good opportunity to study the economic impact
of immigration on the host country. One particular channel through which the inflow
of a large number of immigrants within a relatively short period of time can affect
the host country is the purchasing power of natives. Our main goal in this paper is to
exploit this natural experiment to analyze the impact of Syrian immigrants on consumer prices in Turkey.2 In particular, we compare the pre- and post-immigration
prices in the refugee-receiving regions, with pre- and post-immigration prices in
many alternative control regions within a difference-in-differences setting. We do not
directly observe refugees or their consumption baskets; we, instead, difference out
the changes in prices for all CPI items for treatment and control regions.
The advantage of this natural experiment is that both the immigration decision
and the location choice within Turkey are mostly exogenous to the refugees’ preferences (Tumen 2016). The immigration decision is driven by the Syrian Conflict,
which forced Syrians to leave their homes within a short period of time. The refugeesending areas are very close to the Syrian-Turkish border. The cities of origin and
the corresponding refugee ratios among the entire population of refugees in Turkey
are as follows: Aleppo (36 %), Idlep (21 %), Raqqa (11 %), Lattika (9 %), Hassakeh
(5.4 %), Hama (7.5 %), and other provinces (10 %). This pattern provides some rough
evidence that Syrians caught under fire are forced to cross the nearest border.3 The
location choice within Turkey is mostly driven by the location of accommodation
camps constructed by the Turkish government in cities close to the Syrian border.
Although some of the refugees have left southeastern Turkey and moved toward the
1 This
figure includes the estimated number of unregistered refugees. For the latest numbers and
more detailed statistical information about the Syrian refugee crisis, see the United Nations website
http://data.unhcr.org/syrianrefugees/regional.php.
2 See Tumen (2015) for the use of natural experiments in migration research.
3 See AFAD (2013) for much more detailed descriptive statistics about the Syrian refugees in Turkey. Our
companion paper (Ceritoglu et al. 2015) provide more information on the institutional setting in Turkey.
Immigration and prices: evidence from Turkey
659
western regions of the country, the refugee to native population ratios are still small
in regions with no nearby accommodation camps. Based on a report published by the
Turkish Disaster and Emergency Management Presidency (AFAD), around 75–80 %
of the refugees were living out of the government-operated accomodation camps as of
2013.4 But, a great majority of those living out of camps chose to stay close to camps
to benefit from health, education, food, and other basic public services provided by
the Turkish government for free. A significant fraction of the ones living out of camps
reported that they left their homes for security reasons and they chose Turkey because
of the ease of transportation and proximity to home. The refugees are not allowed to
work formally (i.e., as a worker registered to the social security system).5 However,
they supply inexpensive labor in the informal market. Ceritoglu et al. (2015) show
that the impact of Syrian refugees on the labor market operates through the informal employment channel: informal native workers have been partly substituted by
refugees. Specifically, they show that the informal employment-to-population ratio
among natives has declined in the refugee-hosting area by 2.2 percentage points and
those who left their informal jobs have either left the workforce or remained unemployed. This finding will facilitate the interpretation of the results we document in
this paper.
There are three different theories about the impact of immigration on the level of
consumer prices (Zachariadis 2012). The first one says that immigration generates a
jump in the level of aggregate demand; therefore, prices of goods and services should
increase as a consequence of immigrant inflows. The second one says the opposite.
Assuming that the labor market attachment levels of immigrants are lower than those
of natives, immigrants will have less time constraints and, thus, they will search for
lower prices more intensively. In other words, they will be more sensitive to price
differentials (i.e., they will have higher price elasticities). Higher price elasticity,
joined with higher search intensity, strengthens the competitive pressure over firms,
which will eventually lead to price reductions in the regions hosting immigrants.
Finally, if the labor market attachment levels of immigrants are not so low and if
immigrants have lower reservation wages than natives due to various well-known reasons listed in the literature, then the resulting labor-cost advantage in the immigrant
4 See
AFAD (2013) for the details of the survey results. There are 20 accommodation centers (camps)
in 10 cities in Turkey. The accommodation centers are located in Adana, Adiyaman, Hatay, Gaziantep,
Kahramanmaras, Kilis, Malatya, Mardin, Osmaniye, and Sanliurfa. Most of the Syrian refugees have been
living in these or the neighboring cities. Although, there is a significant number of refugees in the other
regions of Turkey, such as Istanbul (2.2 %) and Konya (2.3 %), their number is small relative to the
population in these regions. Based on the refugee over population ratios, we observe that the refugees
have been quite densely located in Kilis (38.1 %), Sanliurfa (9.4 %), Gaziantep (11.9 %), Hatay (12.6 %),
Osmaniye (2.4 %), and Mardin (9.0 %). See Ceritoglu et al. (2015) for more details.
5 Unlike most of the Western countries, the term “immigration” is relatively new for Turkey. Except the
case for a much smaller number of refugees received during the Gulf War and the case for expatriates from
Bulgaria, Turkey has not been exposed to any consistent immigrant flows in the post-World War II era.
Some countries deal with immigration issues and set long-term policies by establishing ministries with
exclusive focus on immigrants. In this sense, Turkey is relatively inexperienced about the immigration
issues/policies, which translates into the lack of any legal arrangements for providing work permit to
immigrants. Although there is some effort to rehabilitate the legal status of immigrants, it will likely take
some time before these efforts are finalized as the Syrian Conflict also involves domestic/international
politics as well as the international coordination issues.
660
B. Balkan, S. Tumen
labor-intensive sectors coupled with competitive pressures may lead to price reductions in these sectors relative to the native labor-intensive sectors.
Three important papers in the literature test the relevance of these alternative theories. Lach (2007) uses massive immigrant flows from Russia to Israel in 1990 as
a natural experiment to estimate the impact of immigration on prices. He finds that
a one percentage point increase in the immigrant-to-native ratio leads to a 0.5 percentage point decline in consumer prices. Based on the observation that labor market
involvement rates are low among immigrants, he interprets the decline in prices as
evidence of higher price elasticities and lower search intensities among immigrants.
Cortes (2008) exploits the variation in the flow of low-skill immigrants into several
US cities over time to estimate the impact of immigration on consumer prices from
a long-term perspective. She finds that a 10 % increase in the fraction of immigrants
leads to 2 % reduction in the prices of immigrant-intensive services such as housekeeping, gardening, babysitting, and dry cleaning. She argues that an increase in the
supply of low-skill immigrants bids down wages in the market for low-skill workers,
which generates a cost advantage in the immigrant-intensive sectors, and, thus, leads
to a reduction in prices. Finally, Zachariadis (2012) uses cross-country data for the
1990–2006 period and shows that a 10 % increase in the share of immigrant workers
in total employment decreases the prices of final products by approximately 3 %.6 He
focuses on the prices of basic food items that immigrants are more likely to consume
and on the prices of basic services that they are more likely to produce. He documents
that the decline in the prices of basic food items is somewhat larger than the change in
the price of the “average item,” while the prices of basic services decline slower than
the price of the “average item.” Thus, Zachariadis (2012) argues that both demandand supply-side explanations are driving the negative relationship between immigration and prices, while he highlights that demand-side forces are likely stronger than
supply-side forces.
Using a difference-in-differences strategy, we find that consumer prices have
declined in the hosting region as a consequence of refugee inflows—which is consistent with the main consensus in the literature. The magnitude of this decline is
approximately 2.5 %. We document that prices of goods and services have declined
in similar magnitudes. We find, on the other hand, significant differences across
prices of the items produced in formal labor-intensive sectors versus those produced
in informal labor-intensive sectors. In particular, the decline in prices in the informal labor-intensive sectors is around 4 %, while the impact of immigration on prices
is almost zero in formal labor-intensive sectors. We argue that informal labor market, which is large in Turkey, offers a mechanism through which the refugee inflows
generate price declines. Increase in the supply of informal immigrant workers generates labor cost advantages in the informal labor-intensive sectors, and, thus, leads to
a reduction in the prices of items produced by these sectors. We confirm that these
results are robust using alternative empirical settings.
Our paper is similar to Lach (2007) in the sense that we also rely on a natural experiment generated by an unexpected arrival of a large volume of immigrants,
6 See
also Zachariadis (2011).
Immigration and prices: evidence from Turkey
661
while Cortes (2008) and Zachariadis (2012) deal with non-experimental data sets.
The main difference between our paper and Lach (2007) is that, in our paper, the
impact of immigration on prices is more likely to operate through low labor costs,
because Syrian refugees in Turkey have much lower skill levels than Russian immigrants in Israel; therefore, they are better candidates to be employed as low-wage
workers. In this respect, our paper is similar to Cortes (2008); that is, we also focus
on a mechanism through which the inflow of low-skill immigrants reduces consumer prices through cost advantages generated in the immigrant-intensive sectors.
Zachariadis (2012) focuses on cross-country data and, therefore, on the impact of
aggregate immigration on relative prices. Similar to Zachariadis (2012), we also perform comparisons along goods-services and luxuries-necessities divides; but, unlike
his findings, we do not document meaningfully different results across these categories. Our paper is different from these three papers in that the main underlying
force is the existence of informal employment opportunities in Turkey. Although Syrian refugees are not permitted to work officially, the availability of a large informal
labor market in Turkey allows them to work in low-wage informal jobs—in exchange
for wages much lower than the average low-skill native worker would accept.
In a more recent paper, Akgunduz et al. (2015) aim to estimate the effect of Syrian refugee inflows on various outcomes—including labor market outcomes, food
prices, and housing rents—in Turkey. Using a differences-in-differences strategy and
region-level aggregated food price series, they find that food prices have moderately
increased in the refugee-receiving regions relative to the rest of the country. In our
paper, we exploit the region-level variation along the entire micro-level price data
under the Consumer Price Index. Contrary to Akgunduz et al. (2015) and in line with
the papers mentioned above, we document a negative relationship between immigrant
flows and prices—both for the overall price level and for food prices. We believe that
the micro-level details (in particular, the item-level fixed effects for more than 400
items) provide additional information on the potential forces related to the labor-cost
channel highlighted in our paper.
Other than the papers discussed above, there are only a few more papers directly
estimating the link between immigration and price changes. Alix-Garcia and Saah
(2009) investigate the impact of refugee inflows—from Burundi and Rwanda to
Western Tanzania in 1993 and 1994—on food prices in the hosting region. They show
that prices of non-aid food have jumped significantly after immigration, while the
change in the prices of aid food has only been negligible. Contrary to the findings
reported in our paper—and also to those reported by Lach, Cortes, and Zachariadis—
they argue that the aggregate demand channel has been effective. However, they focus
on a poor-country context; so, in this sense, their results may not be directly comparable to the results documented in other papers. Bentolila et al. (2008) show, using
a macro approach, that immigration led to a decline in consumer price inflation in
Spain in the 1995–2006 period. So, the consensus is that, other than the aid versus
non-aid food discussion for poor countries, there is a negative relationship between
immigration and the level of consumer prices.
Our paper can also be linked to the literature using natural experiments (i.e., data
on forced immigration or refugee flows) to estimate the impact of immigration on
various outcomes. Most of the papers in this literature focus on employment and
662
B. Balkan, S. Tumen
wage outcomes. Card (1990) exploits the natural experiment provided by the Mariel
Boatlift of Cubans to Miami in 1980. He shows that the wave of immigration had
virtually zero effect on the labor market outcomes of the existing Miami residents.
Hunt (1992) employs a similar strategy for the 1962 Algerian repatriates in France
and reports that they had only a negligible effect on the labor market outcomes of
natives in France. Carrington and de Lima (1996) find strong adverse effects of 1970
repatriates from Africa to Portugal on both employment and wage outcomes of the
natives in Portugal. Friedberg (2001) documents that the exogenous inflow of immigrants from the former Soviet Union to Israel had almost no adverse effects on the
labor market outcomes of natives in Israel. Cohen-Goldner and Paserman (2011)
find that the impact of these Russian immigrants on wage outcomes in Israel have
become visible in the long-run. Mansour (2010) exploits the labor supply shock generated by the Israeli-Palestinian conflict and shows that wages of low-skill workers
in Israel have been negatively affected, while the effect on the wages of high-skill
workers is statistically insignificant. Glitz (2012) estimates the impact of the collapse of Berlin wall on the labor market outcomes in Germany and finds negative
employment effects along with zero wage effects. Using a similar identification strategy to ours, Ceritoglu et al. (2015) show that the rapid and unexpected inflows of
Syrian refugees have generated negative employment outcomes (mostly through the
informal employment channel), while the wage effects have been negligible.7
The plan of the paper is as follows. Section 2 summarizes the main properties of
our data set and provides a detailed description of the institutional setting for Syrian
refugees in Turkey. Section 3 explains our identification strategy. Section 4 discusses
the baseline results and also presents the estimates obtained from auxiliary analyses.
Section 5 performs additional robustness exercises. Section 6 concludes.
2 Data and facts
2.1 Details about Syrian refugees in Turkey
There has been a massive flow of refugees from northern Syria toward the southeastern regions of Turkey following the civil conflict in Syria. Syrians residing in the
troubled regions moved toward the nearest border and were accepted in the neighboring countries, including Turkey, Lebanon, and Jordan, as refugees. Those accepted by
Turkey mostly came from the regions geographically close to the Syrian-Turkish border. Figure 1 demonstrates the dramatic increase in the number of Syrian refugees in
Turkey over time. Before 2012, there was virtually no Syrian refugees in Turkey. By
the end of 2014, the number of registered refugees has reached to almost 1.2 millions
and the process is still ongoing. Considering the unregistered ones, the total number
7 There
are several other papers focusing on other outcomes exploiting similar natural experiments. Gould
et al. (2009) investigate the impact of immigration on long-term educational outcomes. Paserman (2013)
estimates the effect of immigration on worker productivity. Maystadt and Verwimp (2014) analyze the
welf …
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