Blessing or Burden? The Impact of Refugees on Businesses and the Informal Economy

Abstract

We study the impact of more than 3 million Syrian refugees on Turkish businesses operating in an economy with a large informal sector. We use an empirical, instrumental variable design that relies on exogenous variations in refugee outflows from Syria and the geographic location of Arabic-speaking communities in Turkey before the conflict began. Using yearly censuses of firms, we find that refugee inflows had a positive impact on the intensive and extensive margins of production, which are highly concentrated in the informal economy. The effects are stronger for smaller firms and those that operate in the construction and hospitality industries.

Keywords: refugees, firms, informality

JEL Classification: J46, J61, and O15