Discussion Paper
No. 2017-36 | June 20, 2017
Matthias Luecke and Claas Schneiderheinze
More financial burden-sharing for developing countries that host refugees
(Published in Global Solutions Paper)


The authors call on G20 leaders to extend more predictable and substantial support to low-and-middle-income countries that host refugees, in recognition of the global public good that these countries provide. Together with other high-income countries, G20 countries should fully cover the cost of providing for the basic and social needs of refugees. They should also help to expand public services and infrastructure to cover the needs of refugees as well as resident populations. G20 countries should work with host countries to ensure that refugees are granted a firm legal status that promotes their social inclusion and opportunities for employment and entrepreneurship.

JEL Classification:

F22, F53, O15


Cite As

[Please cite the corresponding journal article] Matthias Luecke and Claas Schneiderheinze (2017). More financial burden-sharing for developing countries that host refugees. Economics Discussion Papers, No 2017-36, Kiel Institute for the World Economy. http://www.economics-ejournal.org/economics/discussionpapers/2017-36

Comments and Questions

Anonymous - Referee report
June 20, 2017 - 09:08
• Very relevant theme, including also clear relevance for G20 as the suggested proposal requires a coordinated policy response• The paper makes a very good case with well-supported arguments and a clear structure• While the paper frequently highlights the “global shortfall in funding”, one is left guessing as to the amount of this shortfall. Even though there are some hints at what this may be in the latter part of the paper (there is a reference to UN appeals shortfalls in terms of humanitarian assistance, but then the paper also calls for more development assistance on top of that), the overall picture is unclear. It would certainly help if decision makers knew roughly what amount they are being asked for and what of it is for refugees and what for the local population etc. This may be beyond the scope of this paper, but additional analysis to this effect would certainly strengthen the usefulness of the paper’s recommendations to decision makers. • Furthermore, it would need to be made clearer which standard is applied in determining the “basic and social needs” of refugees. This will vary across countries and even localities. How these “basic and social needs” are defined will crucially determine the funding needs as well as practical issues related to the integration into the local community. If this standard is too high vis-à-vis the conditions of the poorer segments of a given host country’s population, this may be a threat to successful local integration. The paper is well aware of this tension, highlighting that G20 leaders should “commit to resources…to fully cover the needs of refugees and local populations…”• What would be interesting to look into is the socio-economic dynamics that may be set into motion by providing “adequate funding to both refugees and the local population”. What are the boundaries for the local population? Should everybody benefit or only the poorer segments of it? If the latter, where to draw the line. In other words – how does the suggested international policy intervention interact with national social policy beyond the “local population”?• The recommendation on the legal status of refugees – though very relevant – appears to be not fully in line with the title of the paper, the connection only being an indirect one.• The paper would benefit from more clearly highlighting its policy recommendations / main messages in the main text body, e.g. by use of text boxes etc to make it more easily readable for decision makers. Key recommendations (“We call on G20 leaders…”) should be emphasized.

Matthias Luecke, Claas Schneiderheinze - Reply to referee report
June 21, 2017 - 20:38
Many thanks to the reviewer for these thoughtful comments. We believe we can address some suggestions within the scope of this paper, while others may be beyond it. • Regarding plausible funding needs, we will try to be more specific (although we would soon get to the point where a more detailed, country-by-country analysis would be needed). In an addition to the financing gap for humanitarian assistance identified by UNHCR, we will also provide a back-of-the-envelope estimate of the cost of providing education for refugee children based on local standards (i.e. assuming the same per-student education expenditure as in each host country in general). • Regarding the definition of basic and social needs of refugees and residents, we presently use the definition applied by UNHCR (which is implicit in their estimate of the global financing gap). It would be difficult within the scope of this paper to go much beyond this general statement as this would require a country-by-country analysis. At times (for example, in Kenya recently), certain poor local residents are known to have moved into refugee camps because access to food and public services there was better than outside the camp. Since conditions in the camp were hardly comfortable, such a state of affairs raises broader questions about when policy interventions to reduce poverty among the local population are needed alongside humanitarian assistance to refugees.• Regarding our demand for a secure legal status for refugees in their host countries, we consider this key to the successful economic and social integration of refugees. We call for a partnership to protect refugees that involves financial support through the international community AND appropriate legal conditions for economic and social integration that only the host country can provide. While our focus in this article is on financial support, we consider it essential to at least mention that host countries need to contribute to the partnership for refugees to be effectively protected.• We will see how we can highlight our recommendations appropriately in the abstract.

Anonymous - Reader comment
June 21, 2017 - 20:35
The authors rightly emphasize the struggle to find funds to help refugees. However, for an econ journal, the discussion should be more sophisticated. For ex, compare what Ger is spending to integrate X refugees & those with TPS with what UNHCR spends on 17 million refugees to make the point that helping near countries of origin is cheaper Second, authors should deal with moral hazard—UNHCR reports 17 million refugees & 40 million IDPs. IF conditions for refugees in neighboring countries were improved as advocated, how many IDPs would become refugees? what would happen to costs then? Third, we know which countries produce refugees. Instead of giving more aid to neighbors who host them, do we need humanitarian intervention in refugee-producing countries so that people do not continue to flee Eritrea etc? In other words, the point that most refugees are from poor countries and living in nearby poor countries is valid, but the conclusion that rich couuntries should give $$ to refugee hosts is not a long term solution. It may create even more issues

Matthias Luecke, Claas Schneiderheinze - Response to reader comment
June 22, 2017 - 16:10
Many thanks for your comments. While we find them highly relevant, they also involve us in much broader debates than we can tackle satisfactorily within the scope of this short policy paper. We will be careful to state the limitations of our paper clearly and will also point out the entry points to the wider debates. Regarding the cost of hosting refugees in countries at different income levels, we are aware that hosting refugees is generally cheaper in poorer countries. We do argue that refugees should normally be hosted (as most refugees already are) in neighboring countries. Very often, these are low-and-middle-income countries where the cost of hosting refugees is indeed relatively low. However, we do not think that all refugees should be hosted in poor countries merely on the grounds that this will minimize monetary expenditures per refugee. We argue that third-country resettlement should be an option for particularly vulnerable refugees or when small host countries face a very large influx of refugees. We consider third-country resettlement an essential element in an equitable global sharing of responsibility for protecting refugees. Participating in third-country resettlement will also usefully enhance the credibility of receiving countries as being genuinely concerned about the welfare of refugees. We are aware of the possible incentive effects that may arise if conditions for international refugees improve to the point where internally displaced persons leave their home countries to seek protection abroad. In fact, UNHCR already protects internally displaced persons in many countries. Our arguments in favor of providing a decent livelihood for international refugees apply equally to internally displaced persons; we will make this more explicit. The fiscal implications of this argument are limited because UN humanitarian programs for particular "country situations" already cover displaced individuals both within the country of concern (Syria, South Sudan, etc.) and abroad. We are also aware that most international refugees originate from a small number of countries (including, but not limited to, Syria, Somalia, and Eritrea). It would be nice if outside humanitarian intervention could reliably end civil (and proxy) wars, rebuild state institutions, and replace oppressive regimes. We note that although humanitarian intervention has often been attempted, with varying degrees of success, there remain many protracted "refugee situations". In our paper, we limit ourselves to analyzing how the international community can protect these refugees more effectively.