# **1 Introduction**

As a result of the recent ‘Refugees crisis’, which is the largest refugee crisis since the end of the Second World War, the issue of forced displacement is at the core of public discourse in many European countries. Understanding how policy measures and their interaction with local contexts, can help foster integration, reduce inequalities, and promote social cohesion between displaced populations and host communities is of paramount importance. Yet, the process of economic integration of refugees and how it is affected by the interplay between policies and local contexts are still not fully understood.

Switzerland provides a unique setting to examine these questions. It is an important example of a multilingual and multicultural society. Moreover, Switzerland is one of the European countries that hosts the largest number of refugees per capita (World Bank 2021.<sup>2</sup> ) It also has a long history of receiving asylum seekers. At the end of the Second World War, Switzerland started hosting refugees coming from Eastern European countries. It led the international effort to set out the rights of individuals who are granted asylum and the responsibilities of the host nations, which led to the adoption of the 1951 Refugee Convention (Convention de Genève de 1951). Over the years, it has also had one of the most coherent refugees-related policies among European countries, and it never closed its borders to refugees (Piguet 2019).

The aim of the study is to examine the economic integration of refugees in Switzerland, the related inequalities, and the role of policies and local contexts in affecting the pattern of integration in the receiving society. Specifically, our study focuses on the effect of forced displacement on different dimensions of inequalities of refugees’ labor-market outcomes by examining differences along the gender, socio-demographic and country of origin characteristics. We also examine how the inflow of asylum seekers affects inequalities among the hosts, by comparing labor-market outcomes with the native population. Our study consists of original empirical analysis. We employ a unique dataset based on the Swiss administrative records and social security data provided to us by the Swiss Federal Statistical Office (FSO). Our dataset includes the universe of refugees and migrants in Switzerland over 1998–2018. Our dataset presents the longitudinal dimension, which allows us to follow individuals over time and examine their labor-market outcomes and career trajectories over the life-cycle, comparing refugees to the host population and other migrants.

Our study complements the other papers that are part of this World Bank project on forced displacement. Specifically, it is closely related to the studies that examine the effect of forced displacement on inequalities. These studies focus on both low and middle-income countries, which have different traditions of hosting refugees (e.g., Albarosa and Elsner (2021) focusing on Germany; Kovac et al. (2021) on Bosnia and Herzegovina and Croatia; Murard (2021) examining the case of Greece and Aksoy and Ginn (2021) focusing on a cross-country comparison). On the other hand, we focus on Switzerland, an advanced economy with a multicultural society, and a long historical tradition of hosting refugees.

Our paper makes three main contributions to the existing literature. First, the specific context of Switzerland where refugees are randomly allocated across cantons that are different in terms of local economic and social conditions, provides us with a ‘natural experiment’. This allows us to rigorously evaluate the causal effect of these determinants on refugees’ labor market outcomes and economic integration. In this context, we examine the role of initial local conditions such as natives’ attitudes towards refugees at the time of arrival in the host location, and their subsequent effects on the trajectory of economic integration. Second, we examine in a horserace model the relative importance of three fundamental initial local conditions, namely natives’ attitudes, unemployment and co-ethnic networks. This allows us to determine the possible interplay among them. Third, contrary to what has been done in the core of the existing literature, we have a much longer time-frame. We are able to follow the same individuals over 20 years. This will allow us to examine the pattern of economic integration and how it changes over time in the short, medium and long-run. This is especially important to be able to draw

> 2. https://data.worldbank.org/indicator/SM.POP.REFG [Data accessed on May 14, 2021].

2