WIIW The Vienna Institute for International Economic Studies - Wiener Institut für Internationale Wirtschaftsvergleiche

How do welfare levels influence refugees' intra-state location choice? The welfare magnet hypothesis claims that migrants will be disproportionately drawn to high-welfare locations. So far, the hypothesis has proven difficult to verify empirically because of the multiplicity of factors influencing mobility choices. However, due to a policy of initial random dispersion of refugees in Austria and subsequent welfare reforms in specific states, it is possible to causally identify the effect of welfare on location choice. In addition, different rules regarding welfare apply to refugees depending on their protection status. The welfare reforms always left one group of refugees within the state unaffected, thereby creating inner-state control groups. This allows for a rich identification strategy, which controls for state-time, group-time and group-state fixed effects.
The results show strong evidence for welfare levels having an effect on location choice. However, for understanding overall mobility patterns of refugees the importance of state specific support structures cannot be overstated. Finally, policy implications for Austria will be discussed.