Segregation in neighbourhoods and labour market outcomes of immigrants: Evidence from random assignment in the Netherlands
Pascal Beckers & Lex Borghans
#2011-068
How important is the integration of immigrants in society for labour
market outcomes? In this paper we examine the effect of residential
segregation in neighbourhoods on labour market outcomes, exploiting the
random assignment of asylum seekers to neighbourhoods in the
Netherlands. Using Dutch administrative data of the period 1995-2004, we
know all consecutive places of residence, country of origin, and labour
market income of the working population at the level of postal code
areas. While OLS results reveal a considerable negative effect of
non-Western migrant concentration on labour market outcomes, IV-results
show that concentration has a positive effect on outcomes, especially
when also other neighbourhood characteristics are controlled for. On
average, immigrants residing in high concentration neighbourhoods are 29
percent more likely to be employed and have substantially higher annual
wages than immigrants residing in low concentration neighbourhoods. The
positive effect of neighbourhoods with high concentrations of
non-Western immigrants is especially strong for recent immigrants.
Evidence on the heterogeneity within the group of asylum seekers
suggests that especially those who benefit most from living in a
concentrated neighbourhood tend to go to these areas.
Keywords: Immigrant labour market outcomes, concentration, segregation,
random selection, natural experiment
JEL codes: R23, J11, J15