Local Labour Demand and Immigrant Employment

•This paper investigates the effect of local labour demand on employment of immigrant workers.•We take into account self-selection into locations by estimating the effects for refugees who were subject to the Danish spatial dispersal policy from 1999–2010 using full population Danish administrative registers that contain information on admission class of immigrants.•We identify refugee status without any measurement error. Our findings show that assignment to a municipality with a one percentage point higher employment rate increases the employment probability of refugees by 0.5–0.6 percentage points (elasticities 1.1–1.8) two–four years after asylum in Denmark.•While assignment to a municipality with a one percentage point higher unemployment rate decreases the individual employment probability of refugees by 0.9–1.7 percentage points (elasticities −0.16–(−0.19) two to four years after asylum.•We also find significant effects of alternative measures of local labour demand on employment chances of refugees. Our results provide quasi-experimental evidence that immigrant employment is sensitive to local labour demand conditions.