02. June 2022

Interview with Antonio Ciccone Interview with Antonio Ciccone: World War Refugees Fuelled Productivity and Wages

World War Refugees Fuelled Productivity and Wages in Germany up to Today

The number of refugees globally is constantly on the rise, due to war, civil conflicts, economic collapse, climate change and natural disasters. According to estimates of the
United Nations, the number of refugees reached 100 million in mid-2022, the highest figure ever recorded.

Refugees often stay for good in the receiving country. In this context, economists Antonio Ciccone from the University of Mannheim and Jan Nimczik from the European School of Management and Technology Berlin investigated the long-term effects of migration in Germany after the Second World War.
In the years after the end of the war, millions of people were displaced westward, making up more than 15 per cent of the population in the newly founded Federal Republic of Germany in 1949.

The authors scrutinised today’s economic consequences of migration at the border between the French and the US occupation zone between 1945 to 1949 in South-West Germany. At the time, the US zone admitted refugees during the occupation period whereas the French restricted access.
It is the only longer border segment where municipalities in both occupation zones ended up in the same state of the Federal Republic of Germany – Baden-Württemberg.

The following interview with Antonio Ciccone focuses on the results of the study and the long-term economic consequences of migration.

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What are the main results of your study?

That refugees arriving in Germany after the Second World War contributed significantly to the high levels of productivity and wages today. Their positive impact on German economic growth can be seen starting in the 1950s and 1960, the times of the so-called ‘Economic Miracle’ or Wirtschaftswunder. Measuring the economic contribution of World War refugees more than 70 years after their arrival was challenging. But the size of the contribution is important. We need it to evaluate the long-term consequences of refugee movements and immigration. The political debate almost always focuses on the short-term consequences only.

What are the long-term growth effects which you observed?

The main effects are substantial increases in income per capita, productivity, and wages in the places receiving refugees. We also find the positive effects on productivity and wages looking within firms, not just in the aggregate data.

And what about the costs?

The long-run cost of housing increased in the places receiving refugees. We see this as a consequence of the rise in productivity and wages.

Can you rule out that the observed differences between both areas existed already before the Second World War?

This was one of the main challenges we faced. Luckily, we were able to locate extensive socio-economic data for South-West Germany before the war. To our own surprise, we even found income per capita from official tax statistics! The evidence shows clearly that the observed differences only emerged after the Second World War.

Is it possible that other socio-economic influences distorted your results?

This is the other main challenge we faced. Although the period of French and US American occupation only spanned four years and ended more than 70 years ago, it is imaginable that it could have had long run socio-economic effects. To examine this possibility, we analysed data on education, health, political attitudes, social norms, risk attitudes, unionisation, international trade, languages taught at school etc. We find no trace of the period of French and US American occupation in this data.

Would you conclude that the results of your study are also valid for current global refugee movements?

Current refugee movements are different from the refugee movement after the Second World War or other past refugee movements. But there are things one can learn by
following up past events. In the case of the refugee movement we study, for example, it was not obvious to contemporary observers that refugees would contribute to higher long-run productivity and wages.

To what extent play language barriers a role for integration and economic development in areas with a high amount of refugees?

This is something we cannot say much about as the refugees arriving in West Germany after the war spoke German. It is interesting that despite the many similarities, refugees faced substantial opposition from the local population. According to historical accounts, they were often treated as inferiors and strangers. One reason for this hostility was the scarcity of housing.

In your view, what are the consequences for the political debate about refugees?

Most of the political debate is focused on humanitarian aid, which is the most urgent issue. However, the economic costs and benefits of receiving refugees also play a role. Daniel Defoe – the author of the famous book Robinson Crusoe – already realised this more than 300 years ago when he argued in favour of admitting German war refugees to England in his Brief History of the Poor Palatine Refugees. Hence, any study of the long-run economic consequences of receiving refugees contributes to the political debate. Fortunately, recently there has been an increasing number of such studies. So, over time, we should end up with a more complete picture of the economic consequences of receiving refugees. This will allow for a more informed political debate.

Antonio Ciccone is a member of the Collaborative Research Center Transregio 224 EPoS and Professor at the University of Mannheim.

Established in 2018, the Collaborative Research Center Transregio 224 EPoS, a cooperation of the universities Bonn and Mannheim, is a long-term research institution funded by the German Research Foundation (Deutsche Forschungsgemeinschaft, DFG). EPoS addresses three key societal challenges: how to promote equality of opportunity; how to regulate markets in light of the internationalization and digitalization of economic activity; and how to safeguard the stability of the financial system.

The interview is a publication of the Collaborative Research Center Transregio 224 EPoS

For further information please contact:
Prof. Dr. Antonio Ciccone
Department of Economics
Mannheim University
Phone: +49 621-181-1830
Email: antonio.ciccone@uni-mannheim.de



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