Discussion Paper

No. 2018-22 | February 26, 2018
The economic effects of refugee return
(Submitted as Global Solutions Paper)

Abstract

The recent surge in the number of forcibly displaced persons who cross international borders in search of protection has prompted interest in evaluating policies that achieve the possible “end points” of the phenomenon. As envisaged by the United Nations High Commissioner for Refugees (UNHCR), these are the integration of the forcibly displaced persons in the country of destination, relocation in a third country, and return to the country of origin. The focus of this brief is on the third aspect, namely the appropriate conduct of return policy viewed from the perspective of the host country and, although the vast majority of forcibly displaced people are found in developing countries, the object here are policies in advanced countries.

JEL Classification:

F22, F66, J61

Assessment

  • Downloads: 384

Links

Cite As

Uri Dadush (2018). The economic effects of refugee return. Economics Discussion Papers, No 2018-22, Kiel Institute for the World Economy. http://www.economics-ejournal.org/economics/discussionpapers/2018-22


Comments and Questions


Marek Dabrowski, Bruegel, Brussels - Commentary
March 19, 2018 - 08:06

Economic vs. political arguments in shaping refugee policies

Uri Dadush is right in his skeptical attitude to programs, which try to encourage a voluntary refugee return from advanced economies to home countries. In most cases, they do not make sense both on economic and humanitarian grounds. Humanitarian arguments seems ...[more]

... to be obvious: most contemporary conflicts, which have generated the largest waves of refugees have a protracted character. Even if stopped at some point their full resolution and reconciliation phase take years. Often the concrete reasons, which pushed individuals to flee their home country such as ethnic, religious or gender discrimination, violation of human rights, etc., continue after the violent phase of conflict is over.

Uri Dadush also convincingly presented economic arguments against such programs. For an individual refugee from low or lower-middle income country (and these are the countries of origin of most contemporary refugees) who lives in high-income country the current income gap is too large to be compensated by any one-off grant aimed at encouraging a truly voluntary return. Each individual also takes into account non-income differences in living standards such as access to education, health care, infrastructure, housing and sanitary standards, public security, etc. Finally, one cannot ignore costs of fleeing a home country and coming to final destination that are (i) high, (ii) front-loaded, and (iii) involving hardly measureable components such as risk to life and humiliation. That is, the correct economic calculation of a potential return decision goes beyond measuring a present value of foregone refugee’s earnings in her/his lifetime horizon.

For the host country, it makes even less sense, as Dadush rightly points out. Most of costs of refugees’ adaptation is front-loaded while economic benefits in terms of their labor market participation, paying taxes, etc. come only gradually. Therefore, once admitted a refugee should be given perspective of long-term stay and fast integration into home country labor market, education system and social and legal institutions (In this note I do not discuss cases when a refugee cannot be granted asylum because s/he does not meet formal criteria or for security reasons and should be deported). In such a context, investing in voluntary return programs means adding to costs of refugee policy while giving up potential economic benefits of refugee integration.

Furthermore, because most of advanced economies in Europe and Asia face dramatic demographic constraints (shrinking and aging population) smooth absorption of refugee labor force is in their vital interest. These are the long-term demographic and labor supply considerations, which provide the strongest argument not only against voluntary return programs but also in favor of more open immigration policies, including acceptance of refugees.

Obviously economic arguments are not the only ones, which determine refugee policies. Quite often, the clash with cultural and social reservations of host societies against excessive or (in extreme cases) any immigration, including refugee inflow. Such reservations play into hand of populist and xenophobic politicians who, in turn, try to add to anti-immigrant and anti-refugee fears and prejudices of given societies. Trying to respond to anti-immigrant sentiments the mainstream parties and politicians take initiatives, which are not always economically rational but demonstrate their willingness to keep the number of refugees under control. Undoubtedly, voluntary return programs belong to this category.

However, the presence of anti-immigrant reservations and fears also calls for improvement in policies and programs aimed at smooth integration of refugees into labor markets of host countries. Some of them such as acceleration of asylum application and refugee vetting process, or granting refugees labor permits early upon their arrival would not only bring forward potential economic benefits for host economies but also reduce upfront costs, including the fiscal ones. Other policies, especially those related to education, professional training, learning host country language, culture and legal system, and other integration measures mean higher costs (especially in the early stages of refugee stay) but also higher economic and social returns in future. Therefore, they can be considered as investment in increasing labor supply and labor productivity, and social and political stabilization. The same concerns public education programs targeted to host societies to minimize their fears and potential prejudices.

There are also new tasks for socio-economic research. One of the questions relates to the potential negative impact of refugee inflow on employment chances of local workers and their wages. While Uri Dadush, based on the large body of existing research, tends to downplay such an impact, the widespread political narratives suggest the opposite. To confront those narratives, more updated and detail empirical analyses (related to concrete countries and sectors) are badly needed.

Furthermore, the mass refugee inflow can also have hypothetical positive impact on income and wealth inequalities. This can happen not only as result of increasing number of low-income population (most of refugees) but also via increasing profit margins of firms who employ low paid refugees. While income inequality has become recently a hot political topic in many countries, the knowledge on factors, which determine it, remains limited.

Progress in such research might help in demining political debate on refugee policies and increase role of economic arguments in their elaboration.


Kirsten Schuettler - Drivers and costs of refugee returns and the role of integration
April 19, 2018 - 21:31

Uri Dadush’s paper explores the economic impacts of refugee return from high-income countries to their countries of origin. By bringing in an economic viewpoint, the paper makes an important contribution to a highly debated, emotional and politicized topic. It puts the discussions about the recent influx of asylum seekers into ...[more]

... Europe into a longer-term economic perspective and provides evidence contradicting current public perceptions on negative economic impacts of the refugee influx.

The paper makes the critical point that conditions in the country of origin are key drivers for returns and that return programs are not likely to promote important number of returns if conditions are not conducive. While the paper cites historical return data for economic migrants, it could also include historical data for refugees. The number of refugee returns has been very low over the last years, with only 4.2 million returning between 2006 and 2015, but nearly 13 million refugees were able to return between 1996 and 2005 according to UNHCR. This points to the importance of the resolution of conflict in the country of origin for larger scale refugee returns.

The discussion about return focuses on two key drivers, security and livelihoods, but would benefit from looking beyond wage and income gaps as a proxy for economic reasons to return. We see returns of economic migrants, even if these income gaps continue to exist. Returns can be the results of a failure to integrate economically or socially. There is empirical evidence that unemployment is a key driver of return. On the other hand, returns can also be the result of the achievement of a savings objective or the acquisition of skills, combined with the prospects of obtaining a job back home that will reward the newly acquired human capital. The savings might be used at home, where they have a higher purchasing power or where the rate of return on investments might be higher. Research on refugee return shows the importance of the ability to reclaim land or to gain access to land elsewhere, in addition to financial resources and social networks (Harild et al. 2015). Access to services and housing for returning refugees are also important. Return to family is another key reason. The paper also mentions in the introduction that how refugees are treated in the destination country influences their return and it would enrich the paper if existing evidence on this could be discussed.

The paper is as much about return as it is about local integration into host countries. It stresses the importance of seeing the initial costs incurred by hosting refugees as an upfront investment to facilitate their integration that will pay off later, once refugees integrate into the labor market, contribute to the economy and pay taxes. Among the measures to facilitate the integration into the labor market, the author might want to include that policies, which place asylum seekers and refugees within a country, should take their potential labor market integration into account. The paper also discusses the economic impacts of integrating refugees. As impacts on the labor market outcomes of natives are an important topic in the political debate it would be good to cite some more of the existing micro-economic evidence and not only look at wage but also at displacement effects. Given the paper’s contributions to the discussion on refugee integration, the author might want to think about changing the title to “The economic effects of refugee integration and return”.

Some minor points:
- The end of the guest worker programs in Europe is cited as an example for circular/return migration by economic migrants (p. 3). European guest worker programs might, however, not be the best example for return/circular migration, as there is evidence that in many cases they led to permanent settlement and an increase in family reunification as a migration channel (for Morocco see de H. de Haas. 2007. ‘Morocco’s migration experience: A transitional perspective.’ International Migration 45(4):39-70).
- Some citations are missing in the list of references (e.g. Kuschminder; Leerkes, Os, and Boersema (2017)).