DP2729 Ethnic Enclaves and the Economic Success of Immigrants - Evidence from a Natural Experiment

Author(s): Olof Åslund, Per-Anders Edin, Peter Fredriksson
Publication Date: March 2001
Keyword(s): Enclaves, Immigration, Labour Market Outcomes
JEL(s): J15, J18, R23
Programme Areas: Labour Economics
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=2729

Recent immigrants tend to locate in ethnic ‘enclaves’ within metropolitan areas. The economic consequence of living in such enclaves is still an unresolved issue. We use an immigrant policy initiative in Sweden, when government authorities distributed refugee immigrants across locales in a way that may be considered exogenous. This policy initiative provides a unique natural experiment, which allows us to estimate the causal effect on labour market outcomes of living in enclaves. We find substantive evidence of sorting across locations. When sorting is taken into account, living in enclaves improves labour market outcomes; for instance, the earnings gain associated with a standard deviation increase in ethnic concentration is in the order of 4–5%.