Assessing the direct and indirect impacts of internal displacement on local and national economies.
Context and main issues
Alongside considerations of human rights and human security, internal displacement also places a heavy burden on the economy. Impacts on internally displaced persons and host communities translate into significant costs at the local and national, and in cases of large-scale and protracted displacement, even regional and global levels.
While the humanitarian needs of forcibly displaced people are of overriding concern to national governments and the international community, the case for internal displacement as a development priority is yet to be made. Yet focusing solely on emergency assistance, although indispensable, does little to address the root causes of displacement and prevent future crises. IDMC seeks to demonstrate the impacts of internal displacement on the economy to support calls for more political attention to addressing the phenomenon and provide durable solutions.
Evidence of the economic impact has mostly been anecdotal and based on individual case studies and qualitative analyses. There is a need for more comprehensive and systematic assessments of the way internal displacement affects the economy, at different levels and across various dimensions and timelines. A systematic, quantitative estimation of the cost of internal displacement on a country’s economy has never been attempted before and requires new concepts and methods. IDMC introduces the first conceptual framework to assess the economic impact of internal displacement and presents methodological options to obtain quantitative cost estimates.
Key research areas
The impacts of internal displacement on the economy can theoretically be either positive or negative, and sometimes both at the same time. This depends largely on which perspective is taken and whether one considers who benefits and who pays. For instance, a drop in wages in the host region due to the sudden arrival of additional labour from IDPs can be seen as a positive impact for employers and a negative one for workers in the host community. A rise in rents in the host region because of the arrival of internally displaced families can be seen as positive for landlords and negative for tenants. A comprehensive assessment of the economic impacts of internal displacement must consider both positive and negative impacts. However, anecdotal evidence shows that while IDPs can contribute positively to host communities, forced displacement presents an overall burden on the economy, especially when it is not, or not sufficiently, planned or properly managed, as is most often the case in crises.
Costs of internal displacement will arise from a wide range of impacts, including on markets of labour, goods and services and across a range of sectors. Additional, long-term costs will also come from impacts on social cohesion, deterioration of psychological and physical health, and changing cultural and group identities. Ultimately, a changing social, economic and political landscape will incur costs over a long time-period that it may not be possible to assess. IDMC will seek to assess how internal displacement impacts the economy in multiple, overlapping and interconnected ways. This includes:
Impacts that can be direct, e.g. when a municipality rents out hotel rooms to accommodate evacuees during a hurricane)
Indirect impacts, e.g. when the same municipality has to reduce financial support to new entrepreneurs because part of the planned budget was reallocated for the evacuation.
Short term, e.g. increasing the capacity of existing emergency rooms in the host community to care for newly arrived IDPs)
Longer term, e.g. investing in new hospitals to match the growing population in the host community, if displacement becomes protracted.
Tangible, e.g. crops and cattle left behind and lost.
Intangible, such as mental health burden due to trauma and stress.
IDMC is working with the International Institute for Applied Systems Analysis on an exploratory research project to set up the conceptual framework for the assessment of the economic impacts of internal displacement and conduct initial testing of quantitative assessment models. This work is intended to inform policies to reduce internal displacement and its negative consequences on people and the economy.
The effect of internal displacement is largely damaging. But under certain circumstances, IDPs can have a positive impact on local economies and turn one of the most challenging life events into an opportunity for themselves, their host community’s and their country’s development. IDMC is collecting evidence of this positive impact through voluntary contributions and case studies.
Research partners are the International Institute for Applied Systems Analysis (IIASA), United Nations University (UNU), Victoria University in New Zealand, Forcier Consulting and the Economist Intelligence Unit (EIU). Current research this area is funded by the Office of U.S. Foreign Disaster Assistance.
IDMC welcomes and actively seeks additional technical and financial partners to continue and expand this work.
Related IDMC publications
Durable solutions for IDPs: challenges and way forward. October 2015
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