The Economic Effect of Refugee Crises on Neighbouring Host Countries: Empirical Evidence from Pakistan
| Author | Zaleha Mohd Noor,Miloud Lacheheb,Amdadullah Baloch,Said Zamin Shah |
| Date | 01 December 2017 |
| DOI | http://doi.org/10.1111/imig.12389 |
| Published date | 01 December 2017 |
The Economic Effect of Refugee Crises on
Neighbouring Host Countries: Empirical
Evidence from Pakistan
Amdadullah Baloch*,** , Said Zamin Shah*
,
***, Zaleha Mohd Noor* and
Miloud Lacheheb****
ABSTRACT
There is a considerable debate in terms of opportunities and challenges about the presence of
refugees in the neighbouring host countries. Most of the existing discourse has focused only
on their humanitarian and security implications. This article, on the other hand, seeks to
uncover this issue through a purely economic lens, focusing on the economic impact of more
than three million Afghan refugees in Pakistan. Utilizing data for the period 1979–2014 and
the ARDL bounds testing approach, we arrive at few important conclusions. The empirical
results indicate that Afghan refugees have a strong negative impact on economic growth in
Pakistan. The effect holds in both the short run and the long run, suggesting that the influx of
refugees lowers real economic activity in the country. Ultimately, the study implies that host-
ing refugees can never be a boon to Pakistan’s economy.
INTRODUCTION
Academic and popular literature, specifically the contemporary evidence, shows that the modern
world is full of dynamics and upheavals. For many in the Global North, this change is elaborated
through dramatic advances in technology and progressive policy transformations; but for many
more, in the Global South, the story is markedly different, characterized by mass poverty, political
turmoil, war and violence. One example is the displacement of more than 60 millions of people
around the world trapped in the worst humanitarian crisis since World War II (Sengupta, 2015;
Graham, 2015). Today the world faces an extraordinary extent of refugee crisis and potentially it’s
the greatest human catastrophe.
1
The on-going, intense and unimaginable horrors of war and con-
flicts, persecution, generalized violence, human rights violations and disaster around the world have
forced millions of people to abandon their homes to become internally displaced persons (IDPs) or
international refugees (Ruiz and Vargas-Silva, 2013; UNHCR, 2016). The total number of the glo-
bal refugee population has increased significantly and they are the most vulnerable amongst us, fac-
ing unimaginable challenges every day (UNHCR, 2016). Data indicate that the numbers of forced
displacement increased further in 2015, with record-high numbers of people fleeing their homes to
neighbouring countries in search of safety and a better future. By the end of the year, nearly, 65.3
* University Putra, Selongor
** University of Agriculture Water and Marine Sciences, Uthal, Baluchistan
*** Islamia College University, Peshawar
**** Kasdi Merbah University, Ouargla
doi: 10.1111/imig.12389
©2017 The Authors
International Migration ©2017 IOM
International Migration Vol. 55 (6) 2017
ISS N 00 20- 7985 Published by John Wiley & Sons Ltd.
million persons were forcibly displaced around the world, which is 5.8 million more than the previ-
ous year. 21.3 million people around the world were refugees, the highest level in the last 20 years.
Among them, 54 per cent of all refugees around the world came from just three countries such as
the Syrian Arab Republic with a number of 4.9 million, Afghanistan with 2.7 million, and Somalia
with 1.1 million. Interestingly, the developing countries hosted 86 per cent of the world’s refugees
under the UNHCR’s mandate. Top hosting countries are Turkey (2.5 million), Pakistan (1.6 mil-
lion), Lebanon (1.1 million), Iran (979400), Ethiopia (736100) and Jordon (664100) (UNHCR,
2016). The recent 13.9 million people is the highest figure in more than two decades. The under-
developed countries provided asylum to 4.2 million refugees or about 26 per cent of worldwide
refugees. The majority of the developed countries have introduced strict and new “extreme vetting
rules”for refugees (Pipes, 2017). Ultimately, the refugees issue falls upon poor countries.
Despite unparalleled generosity demonstrated by host developing countries for prolonged periods,
they also experience long-term socio-economic, political, and environmental effects. The refugees
produce significant economic effects, both positive and negative.
2
The presence of refugees in host
countries has a significant positive impact on the economy through their contribution to agricultural
production, providing cheap labour through integrating labour markets and increasing local ven-
dors’income from the sale of essential foodstuffs, spurring long-term investment, filling demo-
graphic gaps, becoming productive economic producers and consumers and increasing bilateral
trade. Local populations can be benefit from access to schools, medical care and other social facili-
ties built by the international community (UNHCR, 2004).
Simultaneously, refugees can have a negative impact on the economy of the host countries by
increasing the prices and demands for essential food, housing, education, health provisions, infras-
tructure such as water availability, sanitation facilities, and transportation, and also in some cases,
for natural resources such as grazing and firewood (World Bank, 2011, 2012; UNHCR, 1997,
2004). Refugees, on average, have less educational experience; and low skills and unskilled jobs
are often at the bottom of the occupational ladder (Connor, 2010). Therefore, low-skilled refugees
significantly expand the supply of labour for un-skilled occupations, lower the wage level and
increase unemployment (Friedberg & Hunt, 1995). The migration of refugee naturally led to the
process of urbanization and shift to the population demography in host countries (Rother et al.,
2016). Additionally, countries having a high-intensity conflict zone also recorded an average annual
GDP decline of 1.4 per cent. Refugee crises affect economies through many channels. Conse-
quently, increasing conflicts and human displacement have a serious impact on actual and potential
growth.
Few studies have acknowledged the role of refugees in state-building (see for example, Jacobsen,
2002). This strand of literature, though, accepts that refugees impose a variety of economic, secu-
rity-related and environmental burdens on host countries; but they also devote a significant portion
of resources to the host country, such as international humanitarian aid, economic assistance and
human capital. However, the empirical literature endorses the challenges and other hindrances
which exceed its potential benefits to the local people. The refugees’influx compels a state to
strengthen its grips on its borders; but the state finds it difficult to harden its presence there. Alix-
Garcia & Saah (2009) argue that, in spite of the prevalence of humanitarian emergencies, little
research has been conducted on the economic impact of refugees on the host countries, specifically
those countries including Pakistan which have provided shelter to millions of refugees for about
half a century.
One of the major factors behind the low and unstable real economic activity in Pakistan is that
the economy is stuck in economic crises and prevailing social unrest due to a high number of
unregistered refugees and even a considerable portion of registered refugees. The cold war of the
former Soviet Union has culminated in a major refuge crises in the neighbouring countries and has
significantly overflowed a large influx of refugees into the two neighbouring countries, Pakistan
and Iran. Limiting our study to one country, Pakistan has been hosting millions of Afghan refugees
Effect of Refugee Crises on Neighbouring Host Countries 91
©2017 The Authors. International Migration ©2017 IOM
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