The effect of social capital on migrant labor market success: evidence from refugee sponsorship in Canada

Social ties play a central role in migrant labor market integration. Whereas existing research focusses on the co-ethnic ties that also drive migration, this paper examines the effect of connections that reach beyond the co-ethnic community. Studying the effects of such ties is challenging as they are generally both a cause and consequence of integration. We examine a case where a quasi-random sub-set of migrants is provided ties that reach outside the co-ethnic community upon arrival in Canada through a refugee sponsor program where community groups support refugees with whom they have no pre-existing ties called the Blended Visa-Office Referred (BVOR) program. Although sponsorship has no effect on the probability of employment, we find that it improves skill utilization. Refugees with sponsors are more likely to obtain higher-skilled employment and less likely to be self-employed. We also present data on the characteristics of friendship networks to support our argument.