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Integrating Refugees: A Long-Term, Worthwhile Investment

DIW Weekly Report 45/46 / 2015, S. 612-616

Marcel Fratzscher, Simon Junker

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The debate about the massive influx of refugees into Germany often focuses solely on the short-term costs. But while these expenditures are bound to be substantial inthe coming years, the discussion neglects the long-term economic potential of a successful integration of refugees—often, young people—which can transform the initial expenditure into a worthwhile investment. Even if many of the refugees’ labor market prospects may be relatively poor for the first few years due to a lack of qualifications, and those who do find employment may be less productive than the average Ger¬man worker, the long-term gains are likely to exceed the costs. This study uses simple simulations to outline the economic potential by comparing the costs and benefits of an integration in the long run. In addition to a baseline scenario, this article investigates both an optimistic and a pessimistic scenario. (It should be emphasized, however, that these are simulations and not forecasts—clearly, more detailed studies are needed to measure these effects more precisely.) The central question boils down to when, not whether, the integration of refugees gains sufficient momentum to outweigh the costs—because even if the labor market integration turns out to be sluggish, the refugees will still have a positive impact on the German economy after five to ten years. Most importantly, even in terms of per capita income of non-refugees, the benefits will exceed the costs in the long-term, thus highlighting the benefits to the entire economy

JEL-Classification: O15;J11;E24
Keywords: Income distribution, migration, demographic trends,macroeconomic effects, unemployment, productivity
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