# **1. INTRODUCTION**

Refugees pose a massive moral, political and economic challenge for potential host countries.<sup>1</sup> The scale of the challenge is larger than ever, with 60 million people forcibly displaced by conflicts across the world (UNHCR, 2014). War in Syria has produced more refugees than any other conflict of the past two decades: around 4.6 million have fled the country, with an additional 7.6 million internally displaced.<sup>2</sup> About 2.5 million Syrians have found refuge in Turkey, making it the largest refugee-hosting country worldwide.

This paper combines newly available data on the distribution of Syrian refugees across Turkey and the Turkish Labour Force Survey to assess the impact on Turkish employment and wages. The large majority (85 percent) of Syrians have left the refugee camps and entered the Turkish labor market.<sup>3</sup> They are overwhelmingly employed informally, since they were not issued work permits. This makes their arrival a well-defined supply shock to informal labor, and a particularly good context in which to test the predictions of basic economic theory. We instrument for refugee flows using travel distance between 13 origin governorates in Syria and 26 Turkish subregions (338 origin-destination pairs). This allows us to also control for distance from the Syrian border, and thus any confounding factors that are correlated with proximity to Syria.

There is a lack of evidence on the economic consequences of forced displacement for host countries, as emphasized by two recent survey articles, Ruiz and Vargas-Silva (2013) and Mabiso et al. (2014). The paucity of evidence on this major policy issue can foremost be explained by a lack of high quality data, a consequence of the fact that developing countries host 86 percent of the world’s refugees (UNHCR, 2014). This paper helps fill that gap and in addition makes two further contributions to this literature. First, existing evidence is predominantly on the impact of refugees in camps.<sup>4</sup> Hence, papers are typically unable to

> 1 See, for example, the recent leader in The Economist (April 23, 2015) on the European Union’s policy on maritime refugees http://www.economist.com/news/leaders/21649465-eus-policy-maritime-refugees-has-gonedisastrously-wrong-europes-boat-people.

> 2 The Economist (June 21, 2014) http://www.economist.com/node/21604577. The latest figures are for January 2016 from the UNHCR and for July 2015 from the Internal Displacement Monitoring Centre.

> 3 This has become a major source of concern, with a 2014 survey finding that 56 percent of Turkish people agree with the proposal asserting that “Syrians take our jobs,” with that number rising as high as 69 percent in provinces close to the Syrian border (Erdogan, 2014).

> 4 Alix-Garcia and Saah (2009), Maystadt and Verwimp (2014), and Ruiz and Vargas-Silva (2015) on refugees from Burundi and Rwanda in camps in Tanzania; Kreibaum (2014) on Congolese refugees in camps in Uganda; Akgunduz, van den Berg and Hassink (2015a) and Ceritoglu et al. (2015) on Syrian refugees in Turkish camps. Exceptions include Braun and Mahmoud (2014) who present evidence on the influx of German expellees to West Germany after World War II, and Calderon-Mejia and Ibanez (2015) on internally displaced Colombians.

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