November 2003

IZA DP No. 924: Employment Effects of Dispersal Policies on Refugee Immigrants, Part I: Theory

combined with IZA DP 925 published in: Review of Economics of the Household, 2010, 8 (1), 105–146

This paper formulates a partial search model in which unemployed individuals simultaneously search for job and location of residence. Most importantly, we show that, ceteris paribus, a decrease in current place utility increases the transition rate into a new location of residence and the transition rate into employment outside the local labour market, but decreases the transition rate into local employment. Thus, a decrease in current place utility decreases the overall job-finding rate if the local reservation wage effect dominates. We argue that dispersal policies on refugee immigrants are characterized by low average values of current place utility. Hence, the model predicts that dispersal policies increase the geographical mobility rates of refugees and, for a sufficiently large local reservation wage effect, decrease their jobfinding rates.