Effects of Informal Labor Supply and Work Permits: Evidence from Venezuelan Refugees in Colombia 

Abstract :

We analyze the Venezuelan refugee crisis in Colombia to separately identify effects of informal immigration and work permit policies on labor markets. Using Synthetic Instrumental Variables and triple difference-in-differences designs, we find that the informal labor supply shock displaced native workers in both informal and formal sectors, indicating high substitutability between worker types (elasticity = 11). Work permits reduced competition in the informal sector while increasing it in the formal sector, creating 24,440 new formal jobs and approximately $43 million in annual tax revenue. Results suggest work permits create productivity spillovers through reduced skill mismatch, providing economic rationale for immigrant integration policies.