How will Germany’s refugees affect its economy?

Jul 14, 2017

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The long debate over how immigrants affect local economies took a turn in late 2015, when German Chancellor Angela Merkel led her government in the adoption of an “Open Door” policy towards refugees from chaotic countries such as Syria, Iraq, and Eritrea, along with other countries in the Middle East and Northern Africa.  Immigration has long been a divisive subject both in terms of social welfare and economic development—though there is evidence it is an economic boon over the long run, variables such as the speed of cultural integration and the skill sets of the immigrant populations greatly complicate the question.

Chicago Booth’s Initiative on Global Markets asked its panel of European economic experts to consider whether Germany’s refugee influx will benefit German citizens economically over the course of a decade. The results reflect the broader uncertainty about the issue. Though many of the panelists believe the economic effects will be positive, a plurality of economists are unsure.

Even among those who believe the effects will be beneficial, there are warnings that the dynamism brought to Germany’s economy by such immigrants might also be disruptive and cause social unrest among those who might be left behind. “Losses to some workers [are] possible,” warns Peter Neary of Oxford. “Poor integration could lead to social unrest: safety nets needed.”

The skill set of the migrant population is also the subject of debate, with some panelists describing it as a low-skill workforce, while others maintain that the newcomers are well-suited to meet both the needs of the 21st century economy and the demographic needs of Europe, which has an aging population and low birth rates.

Agnès Bénassy-Quéré, Paris School of Economics
“I think it will take more than a decade for the net economic benefits to appear.”
Response: Uncertain

Richard William Blundell, University College London
“This is a fairly skilled and young group, precisely the right mixture of human capital. Of course, there are some losers and usual frictions.”
Response: Agree

Lubos Pastor, Chicago Booth  
“The economy will get bigger but maybe not per capita and there will be redistribution.”
Response: Uncertain