This paper identifies the impact of Syrian refugees on firm performance and market structure in Türkiye. The analysis focuses on the period ending in 2015, when Türkiye hosted 2.5 million Syrian refugees, most of whom were living in urban areas. The influx of these largely unskilled refugees, primarily employed in the informal sector, changed the relative abundance of production factors, tilting the balance in favor of unskilled workers.
The analysis is based an administrative data from the Entrepreneurship Information System (EIS) of Türkiye, encompassing balance sheets, income statements, social security records, and customs data for the entire population of registered firms. Data on Syrian refugee distribution across provinces are sourced from the Disaster and Emergency Management Authority for 2013, Erdogan (2014) for 2014, and from the Turkish Directorate General for Migration Management (TDGMM) for 2015.
To isolate the impact of Syrian refugees on firm performance, the authors employ an instrumental variable difference-in-differences framework. This approach leverages the sudden influx and geographically concentrated settlement patterns of refugees, exploiting the variation in refugee intensity across Türkiye’s 81 provinces. The period 2008–2011 serves as the pre-shock baseline, while 2012–2015 represents the post-shock period. The analysis concludes in 2015 due to a substantial increase in the minimum wage in 2016, affecting more than half of Turkish wage workers.
Main findings:
- Syrian refugees boosted firm sales in Türkiye. A 10 percentage-point increase in the refugee-to-native ratio led to a 3.8 percent rise in firm sales. This effect was most pronounced in construction and manufacturing, likely driven by both increased demand and cost advantages from refugee labor. The effect was smaller in the services sector, where it is harder for the refugees to secure jobs due to the language barrier.
- Syrian refugees in Türkiye increased firm sales-to-assets ratios. Existing firms become more efficient in generating sales from assets, indicating significant cost advantages from the arrival of refugees. A 10 percentage-point increase in the refugee-to-native ratio resulted in a 2.3 percent increase in firm’s sales-to-asset ratios.
- The refugee influx led to an increase in the number of new firms in host provinces. A 10 percentage-point rise in the refugee-to-native ratio resulted in a 5.8 percent increase in the number of active firms.
- There is suggestive evidence that the market structure became less concentrated, implying more competition. A 10 percentage-point rise in the refugee-to-native ratio reduced firms’ average market share by 4.1 percent.
- The minimum wage hike in 2016 dampened the positive impact of refugees on firm creation and market concentration. The effect of Syrian refugees on the number of firms and market concentration become weaker after 2016. The significant minimum wage increase, affecting a large portion of Turkish workers, likely offset the positive effects of refugee-driven firm entry.
- Refugees boosted exports to the Middle East and North Africa (MENA) region. New firms are more likely to export and export to the MENA region. Moreover, the export value and variety of products to the MENA region increase more than those to the EU region while the prices of products exported to the two regions show similar changes, suggesting an effect of migrants’ skills and networks on exports.
- Refugees enhanced export competitiveness. Export prices declined across all regions, indicating a labor cost advantage provided by refugees and a resulting increase in the competitiveness of Turkish exporting firms.
The influx of Syrian refugees has had a substantial impact on the Turkish economy, significantly affecting both incumbent and new firms. The arrival of refugees has led to a notable increase in sales and profitability for existing firms, particularly in sectors like manufacturing and construction where refugees are more readily employed. The refugee influx has also stimulated firm creation, with a surge in new firms entering the market. The refugee influx has also had a positive impact on exports, with a significant increase in exports to the MENA region, possibly driven by the unique skills and networks of Syrian refugees. This suggests that while the refugees provide a cost advantage for firms, their networks and knowledge of specific markets play a crucial role in expanding export opportunities.