Long-Term Effects of Forced Migration

Matti Sarvimäki∗, Roope Uusitalo†, and Markus Jäntti‡

May 26, 2007

Abstract

After the World War II Finland ceded a tenth of its land area to the Soviet Union. As
a consequence 11% of the population, 430,000 persons, were evacuated and settled into
the remaining parts of Finland according to a plan which determined a specific destination
area to refugees from each village in the ceded area. In this paper, we use individual-level
panel data to study the long-term impacts of the evacuation on the refugees. We also use
the exogeneous variation in the characteristics of the assigned destination areas to analyze
the effect of host community characteristics to the economic success of the refugees.
We find that forced migration increased long-term income. The effect is strongest
among men, the young and those at lower quantiles of the income distribution. We at-
tribute a large part of these gains to increased regional mobility. We also find that having
been placed to a wealthier destination area had a positive effect on long-term earnings.

JEL classification:
Keywords:

PRELIMINARY, PLEASE DO NOT QUOTE WITHOUT PERMISSION

1 Introduction
In the Paris peace treaty after the World War II, Finland ceded the Karelian peninsula, Eastern
Karelia and the easternmost parts of Lapland to the Soviet Union. In total, the ceded area
was roughly ten percent of the total pre-war land area. The entire population from 60 rural
∗
Department of Economics, Helsinki School of Economics and Government Institute for Economic Research
†
Department of Economics, Helsinki School of Economics and Labor Institute for Economic Research
‡
Department of Economics and Statistics, Åbo Akademi University

1
municipalities and three cities including Viipuri, the second largest city of Finland at the time,
was evacuated within a few weeks. By 1950, these migrants were settled to the remaining parts
of the country.
The Karelian evacuation caused a massive migration flow. Altogether 430,000 people, 11%
percent of the 1940 population, migrated from Karelia to the remaining parts of Finland. These
refugees were settled according to a Migrant Placement Plan drafted by the Ministry of Agri-
culture in June 1945. This plan assigned refugees from each Karelian village to a specific
municipality in the remaining parts of the country. The number of refugees allocated to each
receiving municipality was mainly based on the availability of land that could be seized from
the local landowners. The distribution of refugees across the receiving municipalities was based
on mechanical application of geographical rules aiming to re-settle the refugees to areas whose
farming conditions resembled those in the ceded area.
In this paper, we evaluate the effect of forced migration on the long-term labor market out-
comes of the migrants. In addition, we study the impact of the characteristics of the assigned
placement area on the economic success of the migrants. The key to our analysis is the exoge-
nous nature of the migration decision caused by the lost war, and the exogenous initial allocation
of the refugees across the different placement areas. To perform the analysis, we have access to
unusual individual-level data on the economic status of the refugee and non-refugee population
in the target area from strictly comparable sources. Our data record both the situation before
the war and post-war outcomes up to fifty years after the initial placement.
The fundamental difficulty in the analysis of the impact of migration is caused by selectivity
problems. Generally, both the migration decision and the location choice of the migrants de-
pend on the observed and unobserved characteristics of the migrants and the destination areas.
A branch of recent literature on the effects of migration has attempted to solve these problems
by concentrating on historical episodes leading to massive migration flows. After the seminal
analysis of Cuban migrants to Miami (Card, 1990), researchers have evaluated the effects of
Algerian repatriates returning to France (Hunt, 1992), Portuguese returning from Africa (Car-
rington and de Lima, 1996), Jews moving to Israel from the Soviet Union (Friedberg, 2001),
and ethnic Germans moving from East Europe to Germany after the fall of the Berlin Wall
(Glitz, 2006). The focus of these studies has been on the impact of immigration flows on the
host country employment and wages. We will return to this issue and examine how the lo-
cal economy adjusted to the inflow of Karelian refugees in our companion paper (Sarvimäki,
Uusitalo and Jäntti, 2007). In this paper, we focus on an equally important issue: the impact
of migrating on the migrants themselves. This question is not quite as often evaluated based
on quasi-experimental analysis, largely due to the lack of comparable data on migrants before

2
migrating. The closely related question of how immigrants assimilate has been more exten-
sively researched. The impact of local labor market characteristics on immigrant outcomes
has been studied in a quasi-experimental setting by, for example Edin, Fredriksson and Åslund
(2003, 2004) and Piil Damm (2006). The setup also resembles the analysis of neighborhood
characteristics in a setting where welfare recipients were encouraged to move into wealthier
neighborhoods (Katz, Kling and Liebman, 2001, 2007) or were placed to neighborhoods in a
quasi-random fashion (Oreopoulos 2003).
The rest of this paper is organized as following. Section 2 provides the details of the settle-
ment policy implemented after the war. Section 3 presents a simple theoretical model highlight-
ing the potential difficulties in assesing the impact of forced migration. The empirical methods
are described in Section 4 and the data in Section 5. Section 6 presents the empirical results,
and section 7 concludes with some final comments.

2 The Settlement Policy

World War II entailed three distinct wars for Finland. A secret addendum to the treaty between
Germany and the Soviet Union defined Finland to belong to the Soviet Union’s spehere of
interest. Following unsuccessful negotiations on the Soviet Union’s territorial demands, the
Red Army attacked Finland in November 1939. In the peace treaty ending the Winter War
in March 1940, Finland ceded roughly 10 percent of its territory to the Soviet Union. The
population of these areas had been evacuated during the war. The Emergency Settlement Act
(pika-asutuslaki) was enacted in July 1940 to settle the refugees in the rest of the country. The
execution of the Act was suspended in June 1941 as Finland joined Germany’s attack to the
Soviet Union. By the end of August, the Finnish troops had reoccupied the ceded areas and on
December 6th the Finnish parliament declared that the ceded areas were re-united to Finland.
About two thirds of the refugees returned to their homes. In the summer of 1944, the Red Army
pushed the Finnish troops back to roughly the same line of defense they had held at the end of
the Winter War. The Paris peace treaty with the allied forces in 1947 restored the borders of the
1940 peace treaty with some additional areas ceded to the Soviet Union (See map in Figure 1).1
Virtually the entire population of the ceded areas was again evacuated. In addition, Finland also
agreed to pay USD 300 million in war reparations to Soviet Union and to expel German troops
from its territory.
1
In addition to the area ceded in 1940, the Petsamo area was ceded to the Soviet Union. Furthermore, the
Porkkala Peninsula was leased for a Soviet naval base for fifty years. Following an improvement in international
relations and changes in military technology that made land-based artillery less important for protecting Leningrad
from the sea, Porkkala was returned to Finland already in 1956.

3
 The war left Finland with approximately 92,000 dead and 228,000 injured (out of total
population of about 4 million). Much of the country’s production capacity was destroyed in the
war and further cuts in capacity were caused by war reparations. For example, a quarter of the
Finnish commercial fleet was handed over to the Soviet Union. Altogether war reparations took
about 15 percent of the government budget between 1945 and 1949 (Tarkka 1990).
Settling the 420,000 refugees was a major burden to the Finnish economy after the war.
Finland was still a predominantly agrarian society, with roughly one half of the working age
population employed in agriculture. Similarly, almost a half of refugees were farmers. The
only feasible option at the time was to resettle the refugee population to areas were they could
get their main income from farming.
In May 1945, the Parliament approved the Land Acquisition Act (maanhankintalaki) that
guided the settlement policy. The refugees who had owned or rented land in the ceded areas
and had received their principal income from agriculture were entailed to receive land from
remaining parts of Finland. Land was primarily taken from the state, the local governments
(municipalities) and the church, but the required amount far exceeded the capacity of the public
sector. Thus roughly two thirds of the cultivated fields, a half of land that could be cultivated and
a third of forest land was seized from private owners. The committee drafting the law proposed
an explicit progressive expropriation schedule for seizing private land.2 (Pihkala, 1952)
The implementation of the Land Acquisition Act was entrusted to the Department of Land
Settlement in the Ministry of Agriculture. Altogether 147 local land redemption boards were
responsible for the expropriation measures and the same number of local settlement boards
had a duty to locate applicants for land. Refugees from each Karelian village were settled
into a designated target municipality. The number of refugees placed to each municipality
was mainly affected by the availability of suitable land, which again depended on the pre-war
farm size distribution and on the quantity of state-owned land in the municipality. The most
important factor in allocating refugees across receiving municipalities was the location of their
municipality in the ceded area. Refugees from the western parts of the Karelian peninsula were
settled along the southern coast, refugees from the eastern part of the Karelian peninsula north
of the first group and the refugees from Northern Karelia even further north. No migrants were
placed in the very North of Finland, where conditions for agriculture are extremely unfavorable.
Refugees from the municipalities surrounding Viipuri, the largest city in Karelia, were settled
close to the capital, Helsinki, and the refugees from Sortavala, the second largest Karelian city,
2
The proposed schedule required private land owners to cede up to 20-80 % of their land holdings depending
on the size of their farms. No land was expropriated from farms smaller than 25 hectares. The landowners were
compensated with government bonds yielding 4 % nominal interest. Inflation eventually wiped out about four
fifths of their value. Pihkala (1952) discusses the acquisition policy and its consequences in detail.

4
close to Jyväskylä located in the middle part of the country. Refugees from the same village
were settled to the same municipality and neighboring villages were settled close to each other.
A slightly aggregated map showing the target area for each municipality in the ceded area is
displayed as Figure 2.
An interesting exception to the settlement policy was that very few refugees were allocated
to the Swedish-speaking municipalities along the western and southern coast. The Land Acqui-
sition Act included a clause demanding that the allocation would be carried out in a manner that
would not change the linguistic composition of the municipalities. After Germany lost the war,
Finland was in desperate need for allies against possible Soviet aggression. President Paasikivi,
who was the strongest advocate of the language clause, hoped that providing favorable treat-
ment to the Swedish-speaking minority would help to maintain good relations with Sweden and
would keep Sweden interested in Finnish affairs. As a compensation, the Swedish-speaking
land owners paid some expenses due to land reclamation (in practice, clearing forests areas into
agricultural land) in other parts of the country.
The destination of non-agrarian refugee population was mainly determined by the availabil-
ity of housing and the distance from the ceded areas. Cities in Eastern Finland received refugee
populations representing nearly ten percent of the population, while cities further west and cities
with the most severe housing problems had much smaller shares.3 While the non-agrarian pop-
ulation was not explicitly allocated, the settlement plan influenced also their migration due to
family ties and employment opportunities with their former landowner employers. Housing
shortages in Helsinki led to direct regulation. In 1945, those who wished to move to the capital
had to file an application with the local housing board.
For this paper, the important elements of the settlement of Karelian refugees are the exoge-
nous migration decision and the exogenous placement of migrants across the target areas. The
first of these conditions is easily fulfilled. Refugee status only depended on the location of the
new border. Those who happened to live on the ceded area had no other options than moving.
The important question that we will analyze below is how similar the refugee population was
to the native population before the war. For this we will use micro-level data from 1939, just
before the Winter War, and municipality-level data on taxable incomes in 1938.
Whether the allocation of refugees across receiving municipalities was exogenous is a more
difficult issue. Clearly the refugees themselves had no influence on the settlement plan deter-
mining their placement area. Not all refugees ever settled on their designated area and many
3
The share of refugees in 1948 in urban areas varied from 9.2% in Mikkeli, 8% in Jyväskylä and 7.8% in Lahti
(all located in Central or Eastern Finland) to 2.6% in Pori (on the west coast) in and 1.6% in Helsinki. Pietarsaari,
a Swedish-speaking town on the Western coast had only 0.4% refugee population.

5
moved elsewhere after the initial settlement. Still, the settlement plan had a strong impact on
the location choices and therefore the characteristics of the assigned municipality are poten-
tially good instruments for the characteristics of municipality where the refugees finally settled.
The remaining question is the extent to which the characteristics of the municipality of origin
are correlated with the characteristics of the target municipality, which might lead to better than
average refugees being settled to better than average municipalities. We will be able to examine
this issue in more detail using data on the pre-war characteristics of the municipalities of origin
and municipalities of destination.

3 Theory
[TBA]

4 Empirical Approach
Suppose for now that the true data generating process is

yijt = αRi + Xi0 β + γQjt + uit (1)

where y is the outcome of interest for individual i living in location j at time t, Ri is a dummy
indicating refugee status, Xi0 is a vector of observable characteristics measured before the war,
Qjt is an unobservable measure of labor market quality and u summarizes individual specific
unobservable factors. We continue under the following assumptions (a) E [Ri uit |Xi0] = 0, (b)
E [Ri Qjt |Xi0 ] > 0 and (c) E [Qjt uit |Xi0 ] > 0.
The first assumption states that refugee status is independent of unobserved characteristics
once we condition for the observed characteristics. While the assumption is not directly testable,
the essentially random location of the new border gives it plausibility. Further, in Section 6.1
we provide indirect evidence of its validity using the available data from the pre-war period.
The second assumption states that we expect refugees to migrate into better post-war labor
markets. This assumption is motivated by the theoretical model [to be added]. It follows from
the fact that the resettlement first moved individuals to new labor markets. While refugees had
limited capability to choose their initial labor market, more refugees tended to be assigned to
more prosperous municipalities. More importantly, we expect that also later regional mobility
among the refugees is high, as they had few location-specific references “pulling” them to stay
in their initial allocation areas. This may have, for example, increased their willingness to

6
accept job offers requiring migration. Both reasons suggest that there is a positive correlation
between refugee status (Ri ) and post-war labor market quality (Qjt ).
The third assumption states that we expect individuals with above average unobserved char-
acteristics to be located in above average labor markets. This assumptions is often called “en-
dogenous sorting” in the social interactions literature and “self-selection” in the migration lit-
erature. Again our simple theoretical model provides a formal argument. To gain intuition,
suppose that u simply represents unobserved ability and that returns to ability are higher in the
high quality labor markets. We should then expect high ability individuals to migrate into high
quality labor markets.
Note that assumption (a) is our key identifying assumption, while the other two merely
complicate identification. That is, if assumption (a) holds, but (b) and (c) do not, estimating α
in equation (1) is straightforward. To see what assumption (b) implies, consider first estimating
equation (1) using a a specification excluding (unobserved) Q. This yields an OLS estimand of
α with the probability limit
bR = α + γδR
plim α (2)

where δR captures the correlation between refugee status and labor market quality.4 This is an
estimate of the total impact of forced migration and as such the key parameter of interest. The
effects consists of two parts. The first part (α) contains the “direct” effect due to loss of, say,
location specific human capital. The second part is the effect due to increased mobility.
Having estimated the total effect, we next decompose it into the two parts discussed above.
To do this, we need a consistent estimate of either α or γ and δR . A straightforward approach
for attempting to directly estimate α is to control for Q in (1) by adding a set of labor market
specific dummies. However, this does not yield consistent estimates. To see why, suppose that
we would observe Q and include it in the regression. Then least squares estimate of α would
have the probability limit
bRQ = α + ρ
plim α (3)

In the Appendix we show that in general ρ 6= 0, and at least when Xi0 is excluded, ρ < 0. The
bias follows from the assumption that Qjt is correlated with uit . Since we also assume that Ri
and Qjt are correlated, this endogeneity bias is transmitted to the estimate of α. Note, however,
that α
bQR contains useful descriptive information: it is the average difference in expected income
between a refugee and non-refugee, who were similar in their pre-war characteristics and who
lived in similar labor markets in 1970. Further, it provides a lower bound for α (at least in the
4
More precisely, δR is the probability limit of the OLS estimator of refugee status in regression of Q on Ri and
Xi0 .

7
case where Xi0 is excluded).
Since we cannot directly estimate α, we next consider the prospects of identifying γ and
δR . The latter is trivially identified if Q is observed [discussion about using a proxy]. However,
estimating γ is troublesome. The key problem is endogenous sorting [Assumption (c)] due to
which it is unlikely that a regression model estimated from cross-sectional (or panel) data with-
out an experimental setting provides convincing evidence on the effect of labor market quality.
That is, if the labor market characteristics (Qjt ) are positively correlated with the unobserved
determinants of the outcome (uit ), least squares estimates of γ are biased upwards. The second
potential problem is that labor market quality is difficult to measure. Hence OLS estimates of γ
potentially suffer from significant attenuation bias towards zero.
To overcome these problems, we use the characteristics of the assigned placement area as
instruments for the characteristics of the municipality of residence. As long as at least some of
the refugees stay in the areas where they were assigned, the instrument has predictive power and
γ is identified. In the treatment effects literature this is analogous to using intention to treat as an
instrument for receiving treatment, thus solving the problem due to selective non-compliance.
The remaining concern is that the characteristics of the assigned placement area might be
correlated with the characteristics of the municipality of origin. Since the pre-war location
choice was a result of endogenous sorting, this sorting may be partly transferred into the place-
ment plan. However, we can control for this bias by including the characteristics of the munic-
ipality of origin in the regression model. The equation system that we estimate using only data
for the refugees, is therefore

yijt = γWjt + Xi0 β + uit

Wjt = Zj0 π1 + Xi0 π2 +vit (4)

where W is a proxy of Q and Zj0 is a vector of characteristics of the assigned placement area
measured before the war. The effects of municipality characteristics Wjt are identified provided
that the settlement plan creates variation in the municipality characteristics after conditioning
on the pre-war municipality characteristics.
bR , δbR and b
We can now combine the information of equation (2) and estimands α γ to obtain
a consistent estimate of α...
[other points to be discussed]

1. Minimum distance estimator (see appendix)

2. Equation (4) can also be used to assess the impact of the characteristics of the initial

8
 destination area.

3. Resettlement is likely to have had general equilibrium effects. Thus, the estimates may
not be informative about the counter-factual world, where Finland had not ceded any
areas. In other words, the “experiment” is likely to have affected both the controls and
the treated. Hence, the counter-factual state for the refugees is the one, where they had
lived on the other side of the post-war border – not the one, where they had stayed in the
ceded areas.

4. Quantile regressions

5 Data
Our primary source of data is the 1950 population Census, the first full census ever implemented
in Finland. Data was collected by personal interviews and the interview data then stored on the
Census forms. Information on each dwelling unit filled one form. These cards were then filed in
boxes sorted by municipality and within municipalities in alphabetical order. In 1997, Statistics
Finland took a sample of the data by picking one in ten boxes. Nearly all information on the
Census forms was keyed into a database The resulting sample contained about 114,000 dwelling
units with 411,629 persons from 392 of Finland’s 547 municipalities. Based on each person’s
first and last names along with their date and place of birth, Statistics Finland matched these
data to the Population Register in order to find the social security number – which had been
introduced in the late 1960s – to each person. Thus, in order to end up in the final sample, the
person had to be alive and live in Finland in late 1960s. Social security numbers were then used
to merge the 1950 census file to a longitudinal census file containing results from population
censuses performed every five years since 1970. This allows following the 1950 census sample
through each subsequent Population Census up to the year 2000.5
The 1950 census contains information on the various household characteristics, place of
birth and residence, education, occupation and sector of employment. Unfortunately, earnings
or wages were not included in the original census forms. Interestingly, the 1950 census also con-
tains retrospective information concerning municipality of residence in 1939. Other information
from 1939 includes the occupational status and industry codes referring to September 1st, 1939
– two months before the war began. The same codes are available from 1950. This creates an
unusual situation where we have longitudinal micro data on refugees and non-refugees from
5
Ideally we would also have data from the 1960 census. However the original punch-cards were destroyed in
the 1970s and the magnetic tapes (where the data had been stored) were damaged in storage.

9
pre- and post-migration periods. Same survey instruments were administered to both groups
and hence all information is fully comparable.
Linking the 1950 Census to the longitudinal Census data collected in 1970 substantially
increases the amount of available information. Most importantly, also annual earnings are
recorded in the 1970 Census. This provides an opportunity to evaluate the long-term effects
of migration 25 years after the war ended. Even longer-term outcomes can be observed by
examining the earnings around 1980–1990 when most of the (surviving) refugees are already
retired from the labor force. Since pension income is based on the accrued pension rights from
each employment spell, it should be a good proxy for lifetime income.
We have access to a smaller random sample of the data originally stored by Statistics Fin-
land, which we complemented with municipality-level tax and population data.6 We limit the
analysis to individuals aged 14 to 54 in 1939 and exclude those, whose municipality of resi-
dence in 1939 is unknown (438 observations); who lived in the partly ceded municipalities (991
observations) or in the Åland Islands (41 observations); and who lived in 1939 in a municipality
for which data on taxable income per capita is missing (796 observations). This leaves us with
information on 36,107 individuals, of whom 4,075 are refugees.
Table 1 reports sample means for selected variables for refugees and non-refugees in 1939,
1950 and 1970. The pre-war means are relatively similar. The main difference is the higher
share of entrepreneurs and lower share of blue-collar workers among future refugees. Further,
the share of population working in manufacturing and living in urban areas is a bit smaller in
the ceded area, while the share working in the service sector is larger. Future refugees are also
more likely to be included in the socioeconomic category “unemployed / out of labor force /
unknown” and to the industry category “unknown”. However, while statistically significant, the
magnitudes of these differences are relatively small. Importantly, the average taxable income
per capita in the municipality of residence is not significantly different between refugees and
non-refugees. The only large difference is that the refugees were far less likely to speak Swedish
as their mother tongue.
The next two columns report means in 1950. Compared to 1939, the population share
employed in agriculture has declined by more than ten percentage points and the decline has
been substantially larger among the refugees. Note that the shares were equal before the war,
but in 1950 refugees were eight percentage points less likely to work in agriculture than non-
refugees. On the other hand, the difference in the fraction of blue-collar workers between
6
Statistics Finland has published detailed annual tables listing taxable earnings based on reports from local
tax boards. Usually each municipality had one tax board, large cities had sometimes several. Before the war
this information is very detailed listing the number of taxpayers by income bracket. After the war less detail is
available, but municipality-level averages can still be calculated with reasonable precision.

10
refugees and natives has vanished. Refugees are still more likely to work in the service sector,
which is also reflected in a higher share working in the public sector.7 They are now also more
likely to live in urban areas, though the difference remains small in magnitude. Not surprisingly
– given that the refugees had lost their homes only six years earlier – there is a clear difference
in the fraction living in owner-occupied housing.
The last two columns report means in 1970. Note that the refugees are still less likely
to work in agriculture and more likely to work in service and construction sectors and now
also in manufacturing. Further, the difference in living in urban areas has intensified. This
reflects the fact that refugees were substantially more likely to migrate between 1950 and 1970
than non-refugees.8 As a consequence, refugees now live in municipalities with higher taxable
income per capita. The refugees are still less likely to live in owner-occupied housing. This
might indicate long-term effects on wealth or simply be a consequence of high mobility. Most
importantly, refugees have higher annual earnings than non-refugees, suggesting that forced
migration might have positive long-term effects on income.
Table 3 reports education of refugees and non-refugees in 1950, when education is first
observed. The sample has now been split into three age cohorts and means for men and women
are reported separately. The young cohort consists of those aged 14–19; the middle cohort of
those aged 20–34; and the old cohort of those aged 35–54 in 1939. The motivation for this
split is that the young cohort had just (or not yet) entered the labor market at the beginning of
the war. This should give them more flexibility to change their sector of employment or to alter
their decisions to acquire education as a response to becoming a refugee. Note also that in 1970,
this cohort was in the prime of their working careers. The middle cohort, on the other hand,
had already made their educational decisions at the beginning of the war. Hence the means in
Table 3 should be a good proxy for their education in the pre-war period. The logic of further
splitting the sample is that the middle cohort had already retired from the labor force.
Table 3 suggests that the population in the ceded areas was somewhat better educated than
the rest of the population. The main difference is that refugees are more likely to have completed
the six year primary education, in particular among the old cohort. Note, however, that the
differences in young and middle cohorts are quite small in magnitude. Further, non-refugee
men in the middle cohort and women in the old cohort are a bit more likely to have completed
the matriculation exam, which was a prerequisite for attending university.
7
See Tables 2 and 3 for a closer look of these transitions
8
The binary migration variable is defined to be one if the municipality of residence in 1970 differs from 1950
and zero otherwise.

11
6 Results
This section reports the results of the regressions discussed in Section 4. We begin by asking
whether we can find indirect evidence of the refugees differing from the rest of the population
prior to the war. We then present our main results on the total effect of forced migration on
economic outcomes. We also attempt to decompose this effect into a direct effect and the
effect due to higher mobility. Finally, we consider the impact the characteristics of the initial
destination area on long-term income.

6.1 Pre-War Differences

In Section 5 we saw that the mean characteristics of refugees were relatively similar to those
of the rest of the population. We next assess whether available data suggest that there was
significant differences in unobserved characteristics affecting labor market outcomes.
The only available variable in the micro-data indicating labor market success in 1939 is
socioeconomic status. To study the possible differences, we first regress a binary employment
status on future refugee status. Next we include age, age squared, speaking Swedish as ones
mother tongue, living in urban area and taxable income per capita (and its square) in the mu-
nicipality of residence as controls. If future refugees differed on average from the rest of the
population in their unobserved characteristics, these differences should show up in the esti-
mate for future refugees status after observable characteristics have been controlled for. Table
4 reports the results. For the most part, we find no differences in the pre-war employment. Cu-
riously, however, 14–19 year old girls living in the ceded area were less likely to be employed
than those in the rest of the country. We also find a negative, but small, association between
future refugee status and pre-war employment for the old cohorts of both men and women.
Unfortunately, we do not observe individual level pre-war income. Hence we need to rely
on an indirect measure, namely the municipality level taxable income per capita. Figure 3
presents the geographical distribution of this measure. Two patterns emerge. First, taxable
income is highest in the cities and market towns. Second, Southern Finland – and Southwest
in particular – is more prosperous than the rest of the country.9 However, the figure does not
suggest that the ceded areas had formed an exception to these patterns. Figure 4 provides
another look at the distributions. It plots the empirical cumulative distributions of log taxable
income per capita for the ceded areas and the remaining municipalities. The distributions are
9
The four municipalities in the very Northeast form a visible exception to this rule. While these municipalities
have a dramatic effect to the map, one should note that they were extremely sparsely populated. In 1939, only
0.4% of the total population lived in these municipalities.

12
quite similar, though the distribution in the ceded areas is a bit more compressed. Finally, Table
5 reports results from municipality level regressions, where the dependent variable is log taxable
income per capita. The reported coefficients are for a dummy indicating that the municipality
was to be ceded after the war. In columns (2) and (4) we include controls for the share of
labor force working in agriculture and dummies for market towns and rural area (cities being
the comparison group). Columns (1) and (2) report results from unweighted regressions. In
columns (3) and (4) regressions are weighted by municipality’s population in 1939. To check
robustness, we also estimate the regressions using an alternative definition of taxable income.
None of the estimates are statistically significantly different from zero.
Hence we conclude that we find no evidence of large pre-war differences between future
refugees and the rest of the population. If anything, there is a negative association between
living in the ceded areas and employment rates.

6.2 Total Effect

Let’s now turn to post-war outcomes. Table 6 presents coefficients for being a refugee in re-
gressions controlling for age, age squared, Swedish-speaking, taxable income per capita (and
its square) in the municipality of residence and fixed-effects for interactions between sector of
employment, socio-economic status and living in urban area. All controls are from 1939, ex-
cept the tax data, which is from 1938. These results correspond to the estimand α bR discussed
in Section 4. Recall that it also provides an upper bound for parameter α in equation (1). More
importantly, it captures the sum of direct and indirect effects of forced migration.
Rows I and II report results from regressions where the dependent variable is a binary em-
ployment measure in 1950 and 1970, respectively. The point estimates are close to zero and
they are estimated quite precisely. The only statistically significant (at 10% level) estimand is
for the young cohort of women in 1950, but even this estimate is small in magnitude, suggest-
ing one percentage point higher employment probability for refugees. Further, the likelihood
that one estimand out of 16 is significant by chance is considerable. Hence we conclude that
becoming a refugee had no effect on neither the short-term or long-term employment rates.
We next study the impact on long-term earnings. Row III reports the effect on log annual
taxable income in 1970.10 For the young and middle cohorts, we find large positive effects on
both men and women. The impact is particularly strong among young cohorts suggesting that
becoming a refugee at age 14–19 increased income at age 45–50 on average by about 19% and
16% for men and women, respectively. The effect for the middle cohort – who were 20–35
10
We include zeros by using log(1+taxable annual income) as the dependent variable.

13
years old at the beginning of the war and 51–65 years old in 1970 – is around 11% and 9%.
For the old cohorts – most of whom were already on pension in 1970 – the point estimates are
negative, but we cannot reject the null of no effects. Figure 4 presents further results from 95
quantile regressions on the log of taxable income in 1970. The effect is larger in the lower end of
the income distribution, in particular for men. In summary, the results suggest that, on average,
forced migration considerably improved income more than 30 years after the first evacuation.
We next ask, whether this effect was particular to the late years of the working careers or
whether it reflects change in lifetime income. To do this, we use taxable income for pensioners
as a proxy for lifetime income. For the young cohort we use data from 1985 and for the middle
and old cohort from 1980. The results (row IV) are similar, though a bit smaller in magnitude, as
the estimates on 1970 earnings. Hence, forced migration seems to have increased also lifetime
income.
These results are in line with our simple theoretical model. Recall that in the model, income
increases solely due to assuming that forced migration leads to higher regional/sectoral mobility.
Rows V to VII support this assumption. In particular, the effect on regional mobility is large.
According to the point estimates, refugees were 7–15 percentage points more likely to change
their municipality of residence between 1950 and 1970 than comparable non-refugees (compare
to 22% of non-refugees migrating during this period). The point estimates also suggest that
refugee males were 9 percentage points and women 3 percentage points more likely to change
the sector of employment between 1939 and 1950 (compare to 50% of non-refugees changing
sector during this period). Refugee males were also somewhat more likely to change sector
between 1950 and 1970, but the effect is small in magnitude.

6.3 Decomposition
In this section we attempt to decompose the income effect discussed above into the part ex-
plained by increased mobility and other factors trough which forced migration affects long-term
income. We concentrate on log annual taxable income in 1970.
Table 6 reports estimates for refugee status on five specifications. The first column gives
results from regressions without any controls and the second column repeats the estimates in
Table 5. Controlling for the 1939 characteristics has some impact on the point estimates, but
the qualitative results are not affected. We next control for the sector of employment in 1970
(column 3). This has only minor impact on the estimates. In contrast, including a set of mu-
nicipality of residence fixed-effects (columns 4 and 5) changes the estimates considerably. The
association between income and refugee status vanishes for young and middle cohorts and be-

14
comes negative for the old cohorts. These estimates correspond to the estimand α
bRQ discussed
in Section 4. Note that it provides a lower bound estimate for the parameter α in equation (1).
Further, it has clear descriptive interpretation. That is, young and middle cohort refugees and
non-refugees who had similar characteristics in 1939 and who worked in the same labor market
in 1970 also had similar earnings in 1970.
We next turn to estimating the parameter γ in equation (1)... [TBA]

6.4 Impact of the Initial Destination Area

TBA

7 Conclusions
Evaluating the effects of migration on the migrants poses a difficult task. The fundamental
problem is that migrants are typically a highly selected group of the population. In this paper,
we have analyzed the effects of migration on a group that has been forced to migrate due to the
post-World War II evacuation of the eastern parts of Finland. Our results indicate that, in the
long-run, forced migration may have had large positive effects. Several measures of economic
status over 30 years after the first evacuation indicate that the refugees performed better than
non-refugees, whose economic situation was similar before the war. We attribute a large part of
these gains to increased occupational and regional mobility. Forcing the refugees to move away
from low-income farming occupations and to find jobs from the industrial and service sectors
seem to have improved their long-term economic outcomes.
Naturally, our results are specific to an exceptional historical period. After the war, Finland
went through a rapid structural change and the economic success of the refugees was linked to
their faster change from farming to industrial and service occupations. It was also affected by
an exceptionally generous “immigration policy” offering compensation for lost property in the
ceded areas and substantial help in resettling to the other parts of the country.
Clearly, resettling individuals by force is hardly a relevant policy option. Nevertheless, we
argue that there are lessons to be learned from this forced mass migration. For example, the
results regarding the importance of regional and occupational mobility are relevant for regional
policy. Our results suggest that regional policy encouraging mobility might be a preferred
alternative to a policy that attempts to support people at declining regions – at least in the long-
run.

15
Appendix
[TBA]

16
References

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159.

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 TABLE 1 SAMPLE MEANS
1939 1950 1970
non- non- non-
refugees refugees refugees refugees refugees refugees
Age 29.4 29.3 40.4 40.3 58.9 58.8
Female 0.55 0.55 0.55 0.55 0.56 0.56
Lives in urban area 0.25 0.24 * 0.29 0.30 * 0.35 0.43 *
Native tongue Swedish 0.10 0.01 * 0.10 0.01 * 0.09 0.00 *
Works in the public sector na. na. 0.14 0.18 * 0.09 0.11 *
Single na. na. 0.15 0.14 0.27 0.27
Owner occupied housing na. na. 0.57 0.48 * 0.75 0.72 *
Migrated since previous period na. na. 0.23 1.00 * 0.22 0.33 *
Taxable income per capita in the
municipality of residence 51.7 46.6 638 675 13.0 14.1 *
Annual taxable income na. na. na. na. 10.7 11.5 *

Socioeconomic status
entrepreneur/ass. family member 0.24 0.27 * 0.38 0.35 * 0.22 0.17 *
white collar worker 0.10 0.10 0.18 0.19 * 0.13 0.14
blue collar worker 0.28 0.23 * 0.42 0.43 0.23 0.26 *
unemployed/out of labor force 0.27 0.29 * 0.03 0.03 0.42 0.43
16 years old or younger 0.11 0.12 0.00 0.00 0.00 0.00
Employed 0.67 0.64 * 0.97 0.97 0.43 0.43

Sector (conditional on not unknown/missing)

Agriculture 0.48 0.48 0.38 0.30 * 0.33 0.24 *
Manufacturing etc. 0.20 0.16 * 0.26 0.25 0.22 0.25 *
Construction 0.06 0.07 0.09 0.11 * 0.10 0.12 *
Service etc. 0.25 0.29 * 0.27 0.33 * 0.35 0.40 *
Sector unknown 0.35 0.38 * 0.10 0.10 0.42 0.43
Observations 32 032 4 075 32 032 4 075 26 688 3 396
* indicates statistically significant difference at 95% level. Taxable income per capita in the municipality of residence is from
the municipality level data, except for 1970 where it is the sample mean of individual taxable income in the microdata. For
this measure, statistical significance of differences is assessed with least-squares regression on refugee status, where
municipality level clustering has been accounted for. For other variables statistical significance in differences is assessed
with group mean comparison t-test.
TABLE 2 TRANSITIONS BETWEEN SECTORS 1939–1950 AND 1950–1970

Non-refugees
Sector 1950 Sector 1970
Agr. Man. Con. Serv. Out Agr. Man. Con. Serv. Out
Agr. 0.70 0.06 0.03 0.05 0.16 Agr. 0.42 0.05 0.04 0.06 0.44
Sector 1939

Sector 1950
Man. 0.05 0.76 0.05 0.12 0.03 Man. 0.03 0.28 0.04 0.15 0.50
Con. 0.09 0.13 0.66 0.09 0.03 Con. 0.04 0.09 0.21 0.12 0.54
Serv. 0.07 0.14 0.04 0.71 0.04 Serv. 0.02 0.06 0.02 0.41 0.48
Out 0.29 0.24 0.09 0.27 0.12 Out 0.02 0.03 0.01 0.06 0.88

Refugees
Sector 1950 Sector 1970
Agr. Man. Con. Serv. Oth. Agr. Man. Con. Serv. Out
Agr. 0.60 0.10 0.06 0.09 0.16 Agr. 0.36 0.06 0.05 0.06 0.47
Sector 1939

Sector 1950
Man. 0.06 0.63 0.10 0.17 0.04 Man. 0.02 0.30 0.04 0.14 0.51
Con. 0.08 0.20 0.61 0.06 0.04 Con. 0.04 0.10 0.22 0.13 0.50
Serv. 0.06 0.16 0.05 0.70 0.03 Serv. 0.02 0.07 0.03 0.40 0.49
Out 0.21 0.26 0.10 0.33 0.10 Out 0.01 0.02 0.03 0.07 0.87

TABLE 3 TRANSITIONS BETWEEN SOCIOECONOMIC STATUS 1939–1950 AND 1950–1970

Non-refugees
Status 1950 Status 1970
Entr. Whitec. Bluec. Out Entr. Whitec. Bluec. Out
Status 1939

Entr. 0.88 0.02 0.08 0.02 Entr. 0.44 0.03 0.10 0.42
Status 1950

White 0.09 0.81 0.08 0.02 White 0.07 0.49 0.09 0.36
Blue 0.13 0.07 0.79 0.02 Blue 0.09 0.06 0.43 0.42
Out 0.32 0.20 0.42 0.05 Out 0.07 0.20 0.10 0.63
<16 0.29 0.18 0.49 0.04

Refugees
Status 1950 Status 1970
Entr. Whitec. Bluec. Out Entr. Whitec. Bluec. Out
Status 1939

Entr. 0.76 0.05 0.17 0.02 Entr. 0.39 0.03 0.13 0.45
Status 1950

White 0.09 0.79 0.10 0.02 White 0.06 0.46 0.08 0.39
Blue 0.11 0.08 0.78 0.02 Blue 0.06 0.06 0.47 0.41
Out 0.27 0.21 0.47 0.06 Out 0.01 0.20 0.13 0.66
<16 0.28 0.20 0.49 0.03
TABLE 4 EDUCATION, 1950
Cohorts
Young Middle Old
non- non- non-
refugees refugees refugees refugees refugees refugees
Men
Primary 0.80 0.83 0.72 0.76 * 0.54 0.63 *
Secondary 0.04 0.05 0.04 0.05 0.03 0.03
Tertiary 0.05 0.05 0.04 0.03 * 0.03 0.02
None / unknown 0.11 0.07 * 0.20 0.16 * 0.41 0.32 *
Observations 3 373 423 6 932 898 4 078 504

Women
Primary 0.79 0.82 0.71 0.76 * 0.53 0.57 *
Secondary 0.07 0.09 0.07 0.07 0.05 0.05
Tertiary 0.04 0.03 0.03 0.02 0.02 0.01 *
None / unknown 0.09 0.06 * 0.19 0.15 * 0.41 0.37 *
Observations 3 629 475 8 110 1 073 5 910 702
* indicates statistically significant difference at 95% level (group mean comparison t-test). Young
Cohort: 25-30; Middle Cohort: 31-45; and Old Cohort: 46-65 years old in 1950.

TABLE 5 DIFFERENCES IN PRE-WAR EMPLOYMENT

Men Women
Cohorts Cohorts
All Young Middle Old All Young Middle Old
(1) (2) (3) (4) (5) (6) (7) (8)
No controls -0.01 -0.02 0.01 -0.01 -0.04 -0.09 -0.01 -0.05
(0.01) (0.02) (0.01) (0.01) (0.01) (0.02) (0.02) (0.02)
With Controls 0.00 0.01 0.01 -0.02 -0.03 -0.08 0.01 -0.02
(0.01) (0.02) (0.01) (0.01) (0.01) (0.02) (0.02) (0.02)
OLS estimates; standard errors in parenthesis. Young Sample: 15-20; Middle Sample: 21-35; and Old
Sample 36-55 years old in 1940. Excluding Ahvenanmaa and partly ceded areas. Bold, underlined and
italics indicate statistical significance at 1%, 5%, 10% level. Controls: age, age squared, speaking
Swedish as one's mother tongue, living in urban area and taxable income per capita (and its square) in the
municipality of residence.
TABLE 6 DIFFERENCES IN PRE-WAR TAXABLE INCOME PER CAPITA

(1) (2) (3) (4)

log taxable income per 0.07 0.02 0.03 0.02
capita, 1939 (definition I) (0.08) (0.04) (0.10) (0.04)
log taxable income per 0.07 0.00 0.02 0.00
capita, 1939 (definition II) (0.10) (0.06) (0.11) (0.06)
Controls no yes no yes
Weighted no no yes yes
Municipality level least squares estimates on an indicator for becoming ceded area;
standard errors in parenthesis. Controls: share of labor force in agriculture, dummies for
market town and rural municipality. Weights: 1938 population. Sample sizes are 583 (def
I) and 555 (def II).

TABLE 7 TOTAL EFFECTS

Men Women
Cohorts Cohorts
All Young Middle Old All Young Middle Old
(1) (2) (3) (4) (5) (6) (7) (8)
(I) Employed, 0.00 0.00 0.00 0.00 0.00 0.01 0.00 0.00
1950 (0.00) (0.01) (0.00) (0.01) (0.00) (0.01) (0.00) (0.01)
(II) Employed, 0.00 0.03 -0.02 0.01 0.00 0.01
1970 (0.01) (0.02) (0.02) (0.01) (0.03) (0.01)
(III) Annual Taxable 0.09 0.19 0.11 -0.09 0.08 0.16 0.09 -0.02
Income, 1970 (0.03) (0.05) (0.04) (0.07) (0.03) (0.08) (0.04) (0.03)
(IV) Pension Income, 0.11 0.11 0.10 0.15 0.14 0.09 0.15 0.12
1980/85 (0.03) (0.04) (0.05) (0.13) (0.04) (0.03) (0.04) (0.14)
(V) Migrates, 0.11 0.12 0.08 0.15 0.11 0.07 0.11 0.15
1950-1970 (0.02) (0.03) (0.02) (0.03) (0.02) (0.02) (0.02) (0.03)
(VI) Changes Sector, 0.09 0.12 0.09 0.07 0.03 0.03 0.03 0.03
1939-1950 (0.01) (0.02) (0.02) (0.02) (0.01) (0.02) (0.01) (0.01)
(VII) Changes Sector, 0.03 0.03 0.04 0.00 0.01 0.01 0.02 0.01
1950-1970 (0.01) (0.03) (0.02) (0.02) (0.01) (0.03) (0.02) (0.02)
OLS estimates. Standard errors (in parenthesis) are robust to arbitrary heteroscedasticity and municipality level
clustering.Young Sample: 45-50; Middle Sample: 51-65; and Old Sample 66-85 years old in 1970. Excluding the
Åland Islands and partly ceded areas. Bold, underlined and italics indicate statistical significance at 1%, 5%, 10%
level, respectively. Controlling for age, age squared, Swedish-speaking, log taxable income per capita in the 1939
municipality of residence (and its square) and interactions between sector, socio-economic status and living in urban
area in 1939. Pension Income is measured in 1980 for middle and old cohorts and in 1985 for the young cohort.
TABLE 8 REFUGEE STATUS AND ANNUAL EARNINGS, 1970
Men (1) (2) (3) (4) (5)
(I) All 0.15 0.09 0.08 0.00 0.01
(0.04) (0.03) (0.03) (0.03) (0.03)
(II) Young 0.25 0.19 0.10 0.07 0.04
(0.05) (0.05) (0.04) (0.06) (0.05)
(III) Middle 0.14 0.11 0.11 0.01 0.04
(0.05) (0.04) (0.04) (0.04) (0.04)
(IV) Old 0.00 -0.09 -0.08 -0.17 -0.14
(0.09) (0.07) (0.07) (0.08) (0.09)
Women
(V) All 0.05 0.08 0.03 -0.01 -0.01
(0.06) (0.03) (0.02) (0.03) (0.03)
(VI) Young 0.20 0.16 0.07 0.06 0.06
(0.10) (0.08) (0.06) (0.10) (0.07)
(VII) Middle 0.04 0.09 0.03 -0.01 -0.01
(0.05) (0.04) (0.03) (0.04) (0.03)
(VIII) Old -0.12 -0.02 -0.02 -0.09 -0.09
(0.08) (0.03) (0.03) (0.04) (0.04)
Controlling for:
1939 characteristics no yes yes yes yes
1970 Sector no no yes no yes
1970 Municipality no no no yes yes
y = log(1+taxable income, 1970). OLS estimates. Standard errors (in parenthesis) are
robust to arbitrary heteroscedasticity and municipality level clustering. Young Sample: 45-
50; Middle Sample: 51-65; and Old Sample 66-85 years old in 1970. Excluding the Åland
Islands and partly ceded areas. Bold, underlined and italics indicate statistical significance
at 1%, 5%, 10% level, respectively. Base controls: age, age squared, Swedish-speaking,
log taxable income per capita in the 1939 municipality of residence (and its square) and 30
(sector) x (socio-economic status) x (urban) interactions in 1939.
FIGURE 1 AREAS CEDED TO THE SOVIET UNION IN 1940 AND 1944

Source: Wikipedia, the free encyclopedia

FIGURE 2 THE MIGRANT PLACEMENT PLAN

Source: Laitinen (1995)

FIGURE 3 TAXABLE INCOME PER CAPITA, 1938

Dark colors indicate higher taxable income per capita levels. Dashed areas indicate missing data.
Bold lines indicate the new Eastern border.
Figure 4 Empirical Cumulative Distribution of Taxable Income per capita, 1938

.8

.6

.4

.2

0
2 3 4 5

Remaining municipalities Ceded areas

FIGURE 5 REFUGEE STATUS AND TAXABLE ANNUAL INCOME (1970), QUANTILE REGRESSIONS

refugee
Men

0.5
0.4
o

o
0.3

o
oo

o
o
o o
o
o
0.2

o oo
o o
oo
ooo
o o
o

o ooo
oooooo
o o
o oo o
0.1

oo
oo o
o o
o o o
o oo o
o oo oooo o o
oo o
o o o
o oooo o o o
oo o o oo o
ooo o
o o

o
0.0

0.2 0.4 Quantile 0.6 0.8

Women
refugee
0.5
0.4

o
0.3

o
oo

o
o
o o
o
o
0.2

o oo
o o
oo
ooo
o o
o
o
ooo
oooooo
o o
o oo o
0.1

oo
oo
oo o
oooo o
o o
o oo oooo o o
oo o o o
o o o
o oooo o
oo oo o o
oo o oo o
o
o
0.0

0.2 0.4 Quantile 0.6 0.8

Coefficients for refugee status from quantile regressions on log(annual taxable income,
1970). Sample: Individuals aged 45–64 in 1970. Controlling for age, age squared,
Swedish-speaking, sector, socio-economic status, living in urban area and two measures
of taxable income per capita in the municipality of residence in 1939. Horizontal solid
line is the OLS estimate and dashed horizontal lines indicate 90% confidence intervals.
Shaded area indicates bootsrapped 90% confidence intervals (calculated with 1000
repetitions) for quantile regression estimates.