Immigration and Prices: Quasi-Experimental Evidence from Syrian Refugees in Turkey

44 Pages Posted: 18 Jan 2016

See all articles by Binnur Balkan

Binnur Balkan

Stockholm School of Economics; Government of the Republic of Turkey - Central Bank of the Republic of Turkey

Semih Tumen

TED University; IZA Institute of Labor Economics

Abstract

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 percent 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 percent, 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.

Keywords: immigration, consumer prices, Syrian refugees, natural experiment, informal employment

JEL Classification: C21, E31, J46, J61

Suggested Citation

Balkan, Binnur and Tumen, Semih, Immigration and Prices: Quasi-Experimental Evidence from Syrian Refugees in Turkey. IZA Discussion Paper No. 9642, Available at SSRN: https://ssrn.com/abstract=2716583

Binnur Balkan (Contact Author)

Stockholm School of Economics ( email )

P.O. Box 6501
Sveavagen 65
S-113 83 Stockholm
Sweden

Government of the Republic of Turkey - Central Bank of the Republic of Turkey ( email )

Istiklal Cad. 10 Ulus
06100 Ankara, Ankara 06050
Turkey

Semih Tumen

TED University ( email )

Ziya Gokalp Bulvari No: 48
Kolej Çankaya, Ankara 06420
Turkey

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

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