The Economic Consequences of Forced Displacement

Year: 2013 HiCN Working Paper No. 137

Currently, nearly 44 million people around the world are forcibly displaced. This displacement is due to a number of factors, including weather shocks in New Orleans and Indonesia and conflict in Afghanistan and Libya. Researchers have posited that the effect of this movement has led to severe impacts on the populations, but due to estimation and data difficulties, little is known about the causal impact of this movement on livelihoods. This paper presents the first causal evidence of the effect of displacement. A panel data set on households and communities near a conflict zone in northern Uganda offers the opportunity to exploit a discontinuity design in order to minimize endogenous determinants of displacement and obtain plausibly unbiased estimates of the immediate and postdisplacement impact of displacement on civilians. I find that displaced households experienced an initial decrease in consumption of between 28% and 35%, as well as a 1/2 standard deviation decrease in the value of assets compared to nondisplaced households.