Does sectoral diversification matter? The impact of Syrian refugees on Germany's labor market

This study investigates how the economic structure of host regions shapes the labor market impacts of refugee inflows, focusing on the case of the Syrian refugee influx into Germany in 2014-2015. Utilizing a fuzzy difference-in-differences approach, the analysis introduces a novel measure of sectoral diversification to assess local absorptive capacity. The results show that sectoral diversification plays a significant role in moderating short-term labor market outcomes. Counties with less diversified employment structures experience greater adverse impacts on non-German workers, while more diversified regions are better able to absorb new arrivals and mitigate unemployment pressures. These results underscore the importance of considering local economic structures in the regional allocation of refugees and the design of integration policies.