How the existing workforce adapted to the massive forced return migration shock in the 1970s

Migration studies often overlook the economic effects of return migration, despite its growing relevance due to wars, political and climate-induced displacements. This paper investigates this topic through the unique case of Portugal’s so-called “retornados” (returnees), nearly half a million individuals repatriated from former colonies (Angola, Guinea-Bissau, Cape Verde, S. Tomé and Príncipe, and Mozambique) during the mid-1970s. This influx, which increased Portugal’s workforce by up to 15% in some municipalities, provides a compelling natural experiment (see figure).

Unlike many migration scenarios, these returnees, mostly Portuguese-born and highly educated, were near-perfect substitutes for native workers. Using detailed historical census data and shif-share instrumental variable techniques, the authors analyze how this wave of forced migration reshaped the local labor market, uncovering nuanced effects across municipalities and between native and colony-born repatriates.

The study reveals stark labor market disruptions for native workers who stayed in Portugal, with employment rates dropping sharply, particularly in dependent employment. While there is suggestive evidence that male natives compensated through self-employment, women withdrew from the labor force in more affected areas. Interestingly, these impacts were driven by Portuguese-born repatriates, who competed more directly with natives. Wage dynamics also shifted: returnees filled higher-paying roles, suppressing wage growth, narrowing the gender wage gap through a decline in male wages, and highlighting labor market segmentation, with women earning significantly less than men. This research not only sheds light on the economic ripple effects of large-scale return migration but also challenges conventional assumptions about the substitutability and integration of repatriates, offering valuable lessons for policymakers in a world increasingly shaped by forced migration.

Click here to go to the paper by Lara Bohnet, Susana Peralta, and João Pereira dos Santos