Alternative Explanations

This paper focuses on wages conditional on employment as the primary outcome of interest. While these specifications produce economically and statistically significant results, the possibility remains that the effects are driven by selection rather than a true causal effect. I previously showed that there was no statistically significant effect of cash assistance on employment, but if the average treatment effect masks significant effect heterogeneity on observable or unobservable characteristics, it remains possible that positive selection into the sample of employed refugees could be contributing to the results. If certain high-ability refugees are more likely to be employed if they are resettled with more cash assistance, for example, we may see average wages among the employed go up even if individual refugees do not earn higher wages than they would have in the counterfactual scenario where they

were resettled with less cash assistance.

As I noted earlier, there is some evidence of heterogeneity along observable charac-teristics, though the effects of cash assistance on employment are not statistically significant or sizable among any individual group. However, the presence of statistically significant interaction effects warrants closer attention to this alternative explanation for the results.

While it’s not possible to directly decompose the effect on wages conditional on em-ployment into a selection effect and a pure wage effect, in Table A15 I perform one indirect test for the presence of a selection effect. The table contains the results of a version of Equation 1.1 run without controls, using refugee characteristics as the outcome variables of interest. This table is similar to Table 1.2, except that here the specifications are run only on the sample of employed refugees. The results of the table provide some evidence on how much cash assistance generosity changes the composition of employed refugees. Like in Table 1.2, very few refugee characteristics produce statistically significant results. Column 1 contains the full sample of employed refugees while column 2 excludes those arriving in the most recent five years. Depending on the specification, there’s some suggestion that more generous cash assistance draws more low-educated refugees, fewer English speaking refugees, more female refugees, or refugees with more children into employment. These groups gener-ally have lower than average wages, suggesting that it’s unlikely that selection accounts for positive conditional wage effects.³²

32As a final test for selection effects, I estimate a Heckman two step specification (James J. Heckman, 1976), which takes into account that the econometrician observes wages of refugees only when they are employed, and specifies that employment is a function of observable characteristics of refugees and some error term, which may be correlated with the error term in the wage equation. The results of this specification are in Table A16, which suggests that there is a small yet significant degree of selection (ρ and λ are statistically significant), but that this cannot account for the effects of cash assistance on wages.

1.7.1.2 Cash Assistance Generosity and Refugee Populations

It is possible, in theory, that state legislatures may respond to the placement of certain types of refugees in their state by adjusting cash assistance levels. Given that refugee cash assistance is tied to the generosity level of TANF in the majority of states, and refugees make up a tiny portion of overall TANF recipients, this seems unlikely.³³ To confirm this, in results not presented here but available upon request, I plot refugee arrivals for each state by year against TANF maximum benefit levels, and find that in 26 states, they are positively correlated, and in 21, they are negatively correlated.

It is still possible that refugee populations as they were in 1996 predict the evolution of the generosity of cash assistance. To investigate this, in results not presented here I look at the relationship between total arrivals between 1983 and 1995 and evolution of cash assistance between 1996 and 2015, finding no significant association. It appears unlikely, therefore, that states adjust their cash assistance in response to the size of their refugee populations. It is important to note, however, that states would have to adjust their cash assistance in response to certain characteristics of refugee populations in order to bias my results.³⁴

33To my knowledge, exact statistics on the number of refugees enrolled in TANF are not available. For a quick approximation, note that according to the 2015 ORR Annual Survey of Refugees, 18 percent of refugee households that had arrived between 2011 and 2015 used TANF. According to the ORR, between 2011 and 2015 approximately 634,000 refugees, Cuban/Haitian entrants, and other people eligible for ORR services arrived in the U.S. (this does not count unaccompanied minors). Translating these two facts into an estimate of the number of refugees on TANF is difficult, since we don’t know the size composition of the refugee households. Assuming 18 percent of refugee individuals are on TANF gives 114,124 TANF enrollees, which is just 3.6 percent of total TANF enrollment in 2015.

34Given that many rules adjust their benefit levels over time according to stated rules, in Table A3, I show the results of instrumental variables specifications that use these rules as an instrument for actual benefit levels. These specifications drop states that do not use rules to adjust benefit levels. The results are similar.