Immigration and prices: quasi-experimental evidence from Syrian refugees in Turkey
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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.
KeywordsImmigration Consumer prices Syrian refugees Natural experiment Informal employment
JEL ClassificationC21 E31 J46 J61
We thank the seminar participants at the Central Bank of the Republic of Turkey, the participants of the 2015 IZA/World Bank Conference on Employment and Development in Bonn, the European Economic Association 2015 Annual Meeting in Mannheim, and the American Economic Association 2016 Annual Meeting in San Francisco for useful comments. We are particularly grateful to Robert Shiller, Klaus Zimmermann (the editor), and three anonymous referees for extremely helpful suggestions. The views expressed here are of our own and do not necessarily reflect those of the Central Bank of the Republic of Turkey. All errors are ours.
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