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Kiel Institute Focus 35

January 23, 2017 

 
Transforming Exodus into Homecoming*

by Toman Barsbai, Hillel Rapoport

Successful integration is more likely if the preferences of refugees and host locations are taken into account. A proposal by Hillel Rapoport of the Paris School of Economics and Toman Barsbai of the Kiel Institute for the World Economy shows how this can be achieved.

Too many refugees concentrated in metropolitan areas can lead to social tensions, say German policymakers, who recently decided that refugees can be assigned to a particular place of residence. However, this strategy of administrative distribution fails to take account of the interests and skills of the refugees involved. And only by way of exception does it consider social relationships. In terms of integration policy, tying refugees to a place where they don’t want to be is probably as counterproductive as ignoring the emergence of problem areas.

Research conducted in Sweden suggests that the prospects for successful integration of refugees are potentially reduced when refugee preferences regarding residence are not taken into consideration. The location to which they are assigned evidently has long-term effects on refugees’ health, education, and success in the labor market. And just as refugee preferences with respect to where they want to live are being ignored, so, too, are the preferences of host locations for certain groups of refugees.

There is, however, a science-based approach to the problem: matching. Correlating the interests of refugees and host communities prior to distribution would be both more humane and more efficient. By providing for a better choice of location, it would not only benefit the refugees, but also reduce the effort and expense that host countries incur through enforcing a residency requirement. Moreover, it would increase the prospect of successful integration right from the outset—an outcome that everyone wants.

A scientific approach

From an economic standpoint, giving optimum consideration to the preferences of both parties when distributing refugees to particular locations constitutes what is known as a “matching problem.”

The starting point for matching is an allocation formula, which determines how many refugees should live where. Germany is already currently applying such an allocation formula. The Königstein formula takes tax revenue and population size into account to identify how many refugees are to be accommodated in each German state. Similar formulae are also used in distributing refugees within the federal states. With the number of refugees to be absorbed by each locality thus a known quantity, matching can help optimize exactly which refugees are housed where.

To do this, during initial registration refugees would be asked to rank all the federal states by preference. Information about the regional economy, population structure, and other factors would be provided to help them make their choice. Refugees selected at random would then be granted their first preference. Others would get their second choice, and so on.

The same procedure would be used within the federal states to distribute refugees at the local level. To prevent refugees without relevant geographical knowledge being overwhelmed by long lists of towns and villages, different types of locality could be ranked in a specific order. This would allow refugee students to give preference to university cities, young adults without vocational qualifications could choose areas with unfilled apprenticeship slots, and refugees with children could opt for communities that have plentiful daycare and school capacity.

Similarly, a host community’s preference for specific categories of refugees could be taken into account. This might involve giving priority to refugee families or refugees with specific qualifications better suited to the different needs of a rural or urban labor market. Recipients may also prefer refugees from particular countries of origin, based on positive past experience of integrating groups of refugees with a similar background. The preferences of both sides would be matched and, insofar as the distribution formulae allow, refugees would be sent to localities they have chosen themselves and in which they are welcome.

Proven methods for complex matching processes that accommodate the preferences of both parties to the maximum possible extent already exist and draw largely on the work of Nobel Prize winner Alvin Roth. Roth and his colleagues have developed a range of matching mechanisms that optimally regulate school and university admissions and organ donations, for example.

Applying these mechanisms to the distribution of refugees among host regions and communities would not involve any significant additional cost, but the potential benefits would be considerable if more appropriate distribution were to result in improved integration. Both sides would have a say and likely develop some ownership of the process and its outcome. This democratic and humane element has so far been lacking from the practice of distributing refugees by administrative fiat. Of course, many refugees would not get their first preference and some would end up with their last choice. But by accommodating and fulfilling other wishes—a second, third, and fourth choice—matching would represent a marked improvement on the status quo with regard to refugee distribution. This issue has become all the more important now that Germany’s new Integration Law can lead to refugees being tied to a particular place of residence for many years.

In principle, this method could also be applied at the EU level. But as long as many EU countries continue to refuse to take in any refugees, or more than just a small number, its adoption and implementation without a mandatory distribution formula would be extremely difficult politically. By contrast, the established use of distribution formulae makes Germany ideally suited for introducing a matching system.

Irrespective of the debate over whether and how many refugees each of the federal states or individual communities should ultimately accept, it is in the interest of all concerned to make the distribution process as efficient and also as humane as possible. After all, most people—refugees and natives alike—care about where they live and who their neighbors are.

(Slightly revised version of an op ed in the Frankfurter Allgemeine Zeitung of December 31, 2016, titled “Besser ankommen nach der Flucht“)

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*The Kiel Institute Focus Series presents papers on current economic policy topics. Their authors are solely responsible for their content and their views or any policy recommendations they may make do not necessarily represent the views or recommendations of the Institute.