Quasi-experimental impact estimates of immigrant labor supply shocks: the role of treatment and comparison group matching and relative skill composition

This paper examines the employment effects of an increase in labor supply using the politically-driven exodus of ethnic Turks from Bulgaria into Turkey in 1989. The strong involvement of the Turkish state in the settlement of earlier waves of repatriates provides us a strong source of exogenous variation in the 1989 immigrant shock across locations. Using a potential sample of 613 cities and towns in Turkey with variable treatment intensity—in some locations the change in the labor force is almost 10 percent—this analysis places much attention on constructing a matched sample that is well balanced in terms of covariate distributions of the treatment and comparison groups, including matching based on an estimated propensity score. We find a positive effect of repatriates on the unemployment of non-repatriates. In fact, in certain regions, a 10-percentage-point increase in the share of repatriates in the labor force increases the unemployment rate of natives by 4 percentage points. When the analysis is done according to skill groups, we find that the impact is the strongest on the young and on non-repatriates with similar educational attainment.