Refugee immigration and its effects on German markets

According to the United Nation Refugee Agency, it is estimated for 2015 a track worldwide of forced displacement exceeding 60 million. For the first time the number of forcibly displaced people is the highest level of people displaced since World War II (UNHCR, 2015). Among them, Syrian refugees became the largest refugee group since 2014 (3.9 million in 2014, and 4.2 million by mid-2015), replacing Afghanistan as the main country of origin of refugees worldwide, as Afghan refugees had been the largest refugee group for three decades. Even though most Syrian refugees were hosted by neighboring countries such as Turkey, Lebanon and Jordan, the number of Syrian refugees applying for asylum in Europe steadily increased between 2011 and 2015. One has to consider that the statistical picture with respect to the number of people seeking international protection in Europe is partially distorted because the same individual might be registered as asylum-seeker multiple times across the continent (UNHCR, 2015). In 2015 Germany has become the most sought-after final destination among the EU migrants. Approximately nine hundred thousand migrants have continued to pour into Germany as of 20 December 2015. From the migrants entering into Germany, approximately 500 000 have already been registered and requested asylum as of 30. December 2015 (Ministry of Foreign Affairs, 2015). The right of asylum is not only anchored in the 1951 Geneva Convention on Refugees; in Germany, it is also enshrined in the Constitution as a fundamental right, the one unique fundamental right which is applicable only to foreigners. Asylum law has, thus, a special priority in Germany (Ministry of Foreign Affairs, 2015). A preliminary study on the economic impacts of the 2015 refugee inflow suggests that they are positive (DIW, 2015). Germany’s additional spending on housing and feeding of refugees in the first years will be overtaken by the gains in returns by the additional labor force in subsequent years. A preliminary study run by Fratzscher and Junker (DIW , 2015) considered a partial integration of migrants into the labor market in Germany in the coming 10 years. Our paper focuses on the effects of the increasing demand for agricultural products and their effects on agricultural and non-agricultural markets as well as on German economy. Based on the Thünen Baseline 2015-2025 (Thünen Institute, 2016) for Germany an increase in the population and respective changes in consumption brought on by the migrants are regarded. The scenario assesses production reactions due to changes in demand. In a second scenario, expected changes in the labor markets by adopting labor integration patterns observed in the mid-90s from the refugees’ inflows into Germany are added to Scenario 1 analyzing effects on GDP, agricultural markets and labor markets in Germany. The remaining structure of the paper is as follows. Section 2 reviews historical trends of foreigners in Germany. Section 3 describe s the AGMEMOD-MAGNET linkages, as well as the underlying assumptions of the simulated scenarios. Section 4 shows some results obtained regarding changes in commodity balances, market prices and in labor markets in Germany. Section 5 contains the discussion of the results and finally section 6 concludes the paper.