The Welfare Magnet Hypothesis Revisited – A Natural Experiment in Austria

How do welfare levels influence migrants' location choice? The welfare magnet hypothesis claims that migrants will be disproportionately drawn to high-welfare locations. However, the hypothesis has proven difficult to verify empirically because of the multiplicity of factors influencing mobility choices. Due to a policy of initial random dispersion of refugees and stark regional differences in welfare levels in Austria, it is possible to causally identify the effect of welfare on location choice. In some Austrian Länder (federal states) welfare levels for refugees differ depending on a person's protection status, while in others, they do not. On top, there have been three reforms of the welfare system in specific states, which led to reductions in welfare levels of 30 to 60 percent, generating variation over time. The results show strong evidence for welfare levels having an effect on location choice. However, for understanding overall mobility patterns of refugees the importance of state specific support structures cannot be overstated.