Do Regions matter? The local supply of language courses and refugees' labor market integration

We examine the impact of the local supply of language courses on refugees' labor market integration. Our study is novel and important in at least two directions. First, we exploit the German spatial dispersal policy, which can be regarded as a natural experiment to investigate the causal effect of the local supply of language courses on refugees' labor market integration. Second, we look at the mechanisms through which the local supply of language courses impacts a set of outcomes related to refugees' labor market integration. Our results reveal that the local supply of language courses positively affects refugees’ probability of entering paid employment. Regarding the main mechanism – learning the host country language – our estimates reveal an improvement in German language skills for refugees assigned to districts with a higher supply of language courses. The two other mechanisms, signaling and social closure, also find empirical support. Refugees assigned to districts with a larger supply of language courses have a significantly higher probability of completing the course and receiving language certificates than those assigned to districts with fewer language course opportunities. From the policy perspective, our findings imply that the local provision of language courses should be considered in refugees’ residential allocation to facilitate immigrants' integration. This is because limited access to such courses can delay host country language learning, language certificate completion, and labor market entry, thus slowing down the integration of recently arrived immigrants.