1. Refugee surge in Europe: economic view
Shirin Sinaei
Professor Giorgia Giovannetti
University of Florence

2. Introduction
War in Syria and other conflict zones has made a large wave of asylum seekers toward Europe. ( highest number of asylum application in 2015 comparing to past thirty years)
Integration of this population into EU economy has influences:
Short-term impacts; additional public spending due to provision support to asylum seekers, which is shown in form of modest increase of GDP.
Long-term impacts; mainly depend on integration of this population into labor market.
Impacts on labor market; as it will be considered the impacts on native workers are likely limited.
At last there is a summary of policies which can remove obstacles of immigrant integration into labor market.

3. Refugee surge
1.26 million first-time asylum applications were received in 2015, compared to the 565,000 in 2014.
The number for following years is much greater as:
About 8 million people displaced in Syria,
The conflicts continue in Syria, Iraq, Afghanistan, and Africa,

4. Refugee surge in EU

5. Main destination

6. Fiscal effect In short-term:
The expected initial effects on aggregate EU GDP are positive but small.
Significant impact on the countries where the refugee inflows are concentrated.
on a GDP basis:
average budgetary expenses for asylum could increase by 0.05 and 0.1 percent of GDP in 2015 and 2016.
additional public spending for asylum seekers to provide housing, food, health and education

7. For the main countries affected by the present, large inflow of asylum seekers, the additional expenditures:
Germany has projected an additional 0.5% of GDP support per annum in 2016 and 2017, to meet initial needs of the newly arrived immigrants and to integrate them in the labor market.
Austria has projected that spending on refugees and asylum seekers will rise from 0.1% of GDP in 2014 to 0.15% of GDP in 2015 and 0.3% of GDP in 2016.
Sweden, which has been a major host country for refugees for a number of years, has budgeted for additional spending in 2016 of 0.9% of GDP per annum, in order to improve the integration of newly-arrived immigrants.
Hungary, a major transit country into the Schengen area, has announced additional spending of 0.1% of GDP in 2015, to cover costs associated with the new flows of refugees.

8. Only a small part of the immediate fiscal costs is borne by the EU budget
In September 2015, the European Commission (EC) proposed to boost the central EU resources devoted to the refugee crisis in 2015–16 by €1.7 billion (0.01 percent of EU GDP) to €9.2 billion (0.07 percent of EU GDP) by reallocating resources from other parts of the EU budget.
Funding for the FRONTEX budgets, support to member countries for migration and border management under the Asylum, Migration and Integration Fund, transfers related to the relocation and resettlement schemes, and support to countries outside the EU (for example through the EU Regional Trust Fund in response to the Syrian crisis and additional funding for Turkey).

9. Model
Three alternative scenarios relative to the concentration of the flow of asylum-seekers in the three countries considered by the model:
The flow of asylum-seekers is directed only towards Germany between 2015 and 2017 (“Ger Only” scenario);
The flow towards Germany is interrupted after 2015 and is directed towards Italy in 2016 and 2017 (“Ger+Ita” scenario);
After 2015, the flow of asylum-seekers is redistributed across Germany, France and Italy according to the relative scale of GDP (“Ger+Ita+Fra” scenario);

10. Model

11. Figure 2

12. Model
Germany only
the effects on the growth of German economy are positive and rising in the course of the first years, with strong positive spillover effects also on the other countries
arrival of migrants may contribute by over half a percentage point of additional GDP

13. If asylum seeker concentrated in Italy
Model
If asylum seeker concentrated in Italy
The effects on GDP in the first years are slightly stronger in Italy compared to “Ger Only” scenario,
greater government expenditure
adding 0.3% of GDP in 2019

14. Model
Ger+Ita+Fra
The effect drop to the GDP
lower overall growth in Italy in the medium term (as from 2020)
As the largest economy in the area Germany is more "efficient", on the whole, for refugees to be received

15. Long term fiscal effect
The net fiscal impact of migrants is mostly driven by their success in the labor market
Assessing the fiscal effects of immigration requires a comparison between taxes paid and other fiscal contributions made by migrants and the costs of services and benefits used by them
net fiscal impact largely depends on how migrants fare in the labor market which is linked to individual characteristics such as skills and age as well as the state of the business cycle

16. Fiscal resource usage
Immigration can also affect the use of fiscal resources by natives.
Fiscal accounts may worsen because of displacement effects—for example, if the inflow of migrants increase natives’ unemployment rate (and, thus, the unemployment benefits bill) or lower their wages (and related taxes).

17. Effects of benefits The generosity of the benefit system also matters:
On arrival;
asylum seekers receive accommodation, subsistence, as well as integration support (such as language classes). They are often not allowed to work initially, or may do so only under restrictions, until their legal status is decided. This lowers their net fiscal contribution relative to those of other migrants and natives.
After they receive asylum;
if they find work
refugees pay taxes and social security contributions under rules that are broadly similar to those of other migrants or the native population.
If they are not in work
refugees receive benefits, although in some cases they are not entitled to the same welfare benefits as natives. Thus their net fiscal contribution also depends on the generosity of welfare benefits, which varies a lot across EU countries

18. Migrant contribution
Immigration tends to be associated with a small overall positive contribution to the public finances, but the range of estimates is wide:
during , the average fiscal contribution of the migrant population in advanced economies amounted to 0.35 percent of GDP, with most country results falling between ±1 percent of GDP.

19. Fiscal impact
The fiscal impact of immigrants changes over their lifetime, so the age structure of the immigrant population is a key determinant of its net fiscal impact.
Like native workers, immigrants have a weaker net fiscal balance at young and old age and a stronger net contribution during their working-age phase.
Relative to natives, immigrants’ net present value of expected future contributions turns positive later, peaks at a lower level, and often turns negative earlier.

20. Future expectation
Value of Expected Future Net Fiscal Contribution by Age Group using dynamic approach for Germany:

21. .
uncertainty regarding the expected number and composition of the incoming refugees
how many of them will be allowed to (or will want to) stay in the longer term
how fast and successfully they will integrate into the labor market
The net fiscal contribution of the current refugee wave is difficult to predict;

22. Impact on labor market
The impact of the refugees on medium- and long-term growth depends on:
integration into the labor market
lower participation rates, employment rates, and wages than natives
Female migrants and refugees have significantly worse labor market outcomes
The earning and employment gaps are particularly diminished with time spent in the host country

23. Employment and income of refugees relative to native workers
Conditional gap measures the difference in the outcome of interest between natives and immigrants

24. Impact on labor market of native worker
Labor supply effect; adverse effect on the employment and wages of existing workers if migrants have similar skills to the native labor force
Aggregate demand effect; increase in population cause greater demand for goods and services and, as firms increase output, labor demand
Allocation of resources, product mix and technology effects; Immigration may lead to changes in the mix of goods and services produced
The effect of new arrivals on native workers is usually small.

25. Impact on labor market of native worker
The size of effect depends on:
Complementarity of natives’ skills with those of the immigrants. An influx of lower-skilled immigrants might hurt lower-wage native as well as recent immigrant workers, while higher-paid workers gain.
Flexibility in the labor market. In the 1990s, the displacement of native workers to countries with high employment protection, rigid wages, and high business entry costs due to influx of asylum seekers of wars in Bosnia and Kosovo
The state of the economy and the size of the net immigration flow. High net migration flows have been associated with larger displacements of low-skilled workers during recessions than during booms

26. Policies to help integration into labor market
Minimize restrictions on taking up work during the asylum application phase
Strengthen active labor market policies (ALMPs)
Wage subsidies to private employers
Initiatives to ease avenues to self-employment (including access to credit) and facilitate skill recognition
Reducing restrictions on their geographical mobility (including those linked to housing) in order to move to where labor demand is high

27. Summary
Entry of displaced people are large by historical standards and may continue
The economic implications are notable, but not major:
The international experience is that the impact on native workers is likely limited
Faster labor market integration lowers costs and raises gains
Policies help, especially ALMP and labor and product market reforms
Fiscal costs are limited