Does Lower Benefits Incentivize Refugee Naturalization? Evidence from a Natural Experiment

Does lower benefits provide an incentive for refugees to naturalize? I identify the effect of lowering refugees’ benefits on their propensity to naturalize by leveraging quasi-random variation in refugees’ benefit levels induced by a major reform of the Danish social assistance system. The reform sharply reduced social assistance benefits by up to 50 percent for new refugees. I estimate the effect of this decrease in a regression discontinuity design and show that refugees’ propensity to naturalize jumps by about 13½ percentage points at the benefit cutoff. I demonstrate that this marked increase is most likely driven by increased incentives that drive refugees off welfare and into the labor market in the short-term. Moreover, I show that the positive effects on naturalization are concentrated among the most capable refugees who do not face the resource constraints that follow from low education.