Tapping Foreign Potential: How Germany’s Western Balkans Regulation Shaped Labor Migration

Abstract

In 2015, the German government introduced the Western Balkans Regulation, expanding employment access for citizens of the six Western Balkan countries within a broader policy environment that also tightened asylum procedures and return enforcement. This paper investigates changes in migration aspirations and first residence permits in response to the policy. Using a cross-nested logit, we find that the initial Regulation significantly increased migration aspirations toward Germany, whereas subsequent extensions did not raise aspirations further. A synthetic difference-in-differences analysis estimates approximately 14,000 additional employment permits annually, with particularly large effects for Kosovo. Total first residence permits increased by approximately 17,200 annually relative to the synthetic counterfactual. While the estimate may also capture substitution induced by contemporaneous asylum-policy tightening, the Regulation provides the most direct explanation for the increase in employment permits.