Socio-economic impacts of refugees on host communities in developing countries

Claas Schneiderheinze and Matthias Lücke ()

No 03/2020, PEGNet Policy Studies from PEGNet - Poverty Reduction, Equity and Growth Network, Kiel Institute for the World Economy (IfW Kiel)

Abstract: In this study, we review existing research, both theoretical and empirical, on the impact of forcibly displaced persons on residents' livelihoods in host communities in developing countries, with an emphasis on African experiences. An inflow of a large number of refugees represents a large challenge to any host community. This is especially true in developing countries with their limited financial and administrative capacities. Immediately, refugees require accommodation, housing, and key public services such as health care and education. Sooner or later, refugees will seek to provide for their own livelihood, look for work in the informal or formal labor market, and interact economically with the host economy in multiple ways. When developing countries host refugees, they receive financial and technical support from the international community. This support typically covers the subsistence needs of refugees and may also finance other host country expenditures related to their presence. We explain (Sections 2.1 and 2.2) why there is a strong presumption that, with sufficient international financial and technical support, the aggregate impact of refugees on the host community will be at least neutral and maybe even positive. The main insight is that refugees, equipped with international financial support, provide a stimulus to the local economy through their demand for locally produced goods and services, which translates into higher output prices, more demand for local workers, and higher real incomes. This presumption is borne out by the few existing empirical studies.

Date: 2020
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