Propagation of Immigration Shocks through Firm-to-Firm Trade Networks,

Abstract This paper investigates the extent to which an immigration shock to a region propagates through supply chains. Using the unexpected arrival of Syrian refugees, who are densely concentrated in border regions of Turkey, we estimate how firms across the country are affected in terms of sales, employment, and wages. We also examine the impact of the shock on interprovincial trade, focusing on trade volume and network formation. The results reveal positive spillover effects of immigration for firms with pre-existing links to Syrian refugee-hosting regions through upstream and downstream supply chain connections. Furthermore, we find evidence that the shock expands inter-provincial trade and contributes to the formation of new firm-to-firm linkages between provinces. Finally, we show that traditional spatial approaches that compare regions with differing migration rates may conflate cross-province propagation with the direct effect of migrants; in our setting, this conflation overstates direct effects on sales and employment at both the firm and regional levels of aggregation and masks a negative direct wage effect at the firm level.