The effect of mass influx on labor markets: Portuguese 1974 evidence revisited

This paper provides a reappraisal of the evidence from the influx that has been unique in the recent European history, the flood of half a million returnees from Mozambique and Angola to Portugal in the mid-1970s. The objective of this paper is to study the impacts of a large supply shock on aggregate labor productivity, wages and unemployment. In contrast to the previous evidence, the synthetic control analyses find that the influx had a significant adverse effect on labor market outcomes. The results suggest that the Portuguese labor market responded precisely the same way as the standard textbook model predicts: an increase in the number of workers lowered average labor productivity and wages.