The economic impact of refugees in Swedish municipalities

Abstract: This paper analyzes the impact of receiving refugees on municipal income, income inequality, and public finances. The empirical analysis compares Swedish municipalities between 2000 and 2018, a period with large and fluctuating waves of refugees, both across years and municipalities. This paper uses the variance within municipalities, i.e., fixed effects. The results show that an increase of the refugee population by one percentage point decreases income per capita by 3500 SEK and increases inequality by 0.32 points in the Gini coefficient. Alternatively, an increase in the refugee population share by one standard deviation of the within municipality variance decreases income per capita by 0.19 standard deviations and increases the Gini coefficient by 0.62 standard deviations. This effect is persistent over time but smaller for richer municipalities. The aggregated net effect on municipal public finances is positive, when including the effect on government grants, but negative if not included. This is true both on a five and a ten years horizon. Excluding government grants, the net revenue of receiving a refugee is negative 122 thousand SEK per year, the first ten years after arrival.