Language Roulette – The Effect of Random Placement on Refugees' Labour Market Integration

Labour market integration of refugees represents a key challenge for policy makers and has emerged as one of the most dividing topics in the public debate. Pressured countries in Europe have to come up with fair and transparent ways to place asylum seekers among the European states as well as to different regions within their national borders. In this paper, I highlight unsurprising, yet unintended consequences of following the most transparent placement mechanism, that is, random assignment. Thereby, Switzerland with its strong subnational entities and clearly defined language borders can function as a laboratory for European policy. The natural experiment of placing refugees randomly across different language regions causes substantially higher probabilities of finding employment if refugees are placed in regions where the lingua franca matches their individual language skills compared to alien language regions. In addition, the findings suggest that a language match is as good as (costly) language courses. While random assignment of refugees may be desirable for other reasons, it is detrimental for the economic integration process of these immigrants. Thereby, the study provides new empirical evidence for a positive language proficiency effect. The findings also highlight a large space for improving existing immigration policy or replace random assignment with a more fine-grained approach, in particular for a European allocation mechanism looming on the horizon.