In recent years we have conducted several studies on the economic aspects of refugee arrival and return with more than 100 experts from the World Bank, UNHCR and universities around the world. The studies focused on large-scale displacements in Iraq, Jordan, Kenya, Lebanon and Syria. Here’s what we’ve learned so far:
1. Refugees are not the only impact of conflict on neighboring countries. Most refugees flee locally to neighboring countries, where they are sometimes blamed for the entire economic fallout from the conflict. However, conflicts also affect these countries through other channels such as trade, investment and broader regional instability. For example, the conflict in Syria has reduced GDP growth Lebanon and Jordan by 1.7 and 1.6 percentage points per year, mainly due to collapsing exports in tourism and financial services. refugee arrivals, which increased domestic consumption and labor supply, increased their GDP by 0.9 percentage points annually.
2. Refugee arrivals create both winners and losers. The problem with the GDP effect of refugees is that not everyone benefits. Other things being equal, the prices of non-tradable goods and services such as rents may rise as refugee arrivals boost demand (Figure 1). This makes landlords happy and tenants dissatisfied. Similarly, with more workers on the labor market, wages can fall, helping employers and hurting workers. Overall, winners and losers are determined by people’s net consumption and income patterns.
Figure 1. How do refugees affect the economy of the host country?
3. Profits and losses are also affected by hospitality institutions. In Kenya, Refugees had no impact on corn prices as the corn was imported. In contrast, they greatly increased cattle prices in a market tightly controlled by local tribes. In Jordan, the labor market is segmented between Jordanians working in the public sector and high-skilled jobs and foreigners focused on agriculture, construction and basic services. Syrian refugees have not had a significant impact on the Jordanian labor force. Instead, they expelled the migrant workers from Egypt.
4. Winners’ gains often exceed losers’ losses. This point is best illustrated with a simple example. Suppose all goods are produced using land and labor (Table 1). Refugees cut the labor supply in half, increasing the productivity of the land and reducing that of the labor force. Rents will rise from 0.3 to 0.4 and wages will fall from 0.70 to 0.62. Overall, the per capita income of the local population increases by 2 percent after the arrival of refugees, even if refugees are paid the same wages as local workers. The magnitude of this effect can vary with different numbers in this simple example, but the net positive effect predominates as long as there is a fixed factor of production owned by the locals.
Table 1. A simple income example with and without refugee arrivals
|country||Local Workers||refugee work||GDP||Rent||salary||Average local income|
|In front of refugees||100||100||–||100.0||0.30||0.70||1.00|
Notes: The example uses a simple Cobb-Douglas production function with land and labor, where the income share of labor is 0.7.
5. Losers are rarely compensated for their losses. In the above example, if the winners’ profits are shared with the losers, everyone is better off. In practice, such a redistribution from winners to losers does not take place. This government failure can leave large sections of the host country’s population vulnerable to a shock, either in the form of a loss of real income or reduced access to public services as a result of congestion – or both.
6. Refugees may suffer from an impasse between host governments and donors. Host country governments often extend the “temporary” status of refugees to secure future donor contributions. For example, they rely on temporary solutions like transporting water, which is more expensive and less healthy compared to tap water. in the Lebanon, the burden of disease from water transport for refugees reached about 0.7 percent of GDP. Nor do donors commit to a longer-term strategy, as aid is delivered on a project-by-project and year-by-year basis. These two short-term measures reinforce each other to limit effective service delivery.
7. Better conditions in the country of origin clearly increase the return of refugees. Better security, including conflict avoidance and better protection of human and property rights, and better living conditions are increasing refugee returns. However, this effect can be complex. For example, better security can influence people’s choices directly by reducing risk and indirectly by increasing the effectiveness of recovery efforts. Rebuilding in an unsafe environment alone is unlikely to result in a spontaneous return.
8. Refugees never completely stop returning, but their numbers and characteristics change. People also return to their hometowns during intense conflict, but in smaller numbers and for different reasons. we watched differences by age (older), marital status (nuclear family not in exile), and gender (more males) among those returning to high-conflict areas. The return of entire families is disproportionately concentrated in low-conflict areas.
9. Poorer conditions in exile do not necessarily increase returns. It is sometimes claimed that refugees will not return if they find comfortable conditions in exile. This is not necessarily true. Refugees are concentrated at the lower end of the income distribution and often cannot afford the risky and costly journey back even if they wish to return. Improving their conditions in exile can lead to more returns, as we observed in the case of Syrian refugees in Lebanon and Jordan.
10. There is still much more to learn. Refugee movements are complex problems. We can only measure certain narrow aspects of this process with certainty. In many areas such as cultural, ethical and strategic issues, quantification is notoriously difficult, resulting in divergent approaches. On the one hand, economic research tends to focus only on questions that can be answered with sufficient statistical inference. If not careful, this can lead to the drunkenness and the lantern problem – we look for answers where we can see well, but not where to find them. On the other hand, efforts to address these complex issues without regard to measurements or statistical inference can only hint at what matters and how, not how much. The good news is that this gap is closing and our understanding is improving, one study at a time.