The Economic Effects of Refugee Return

This paper explores whether it is in the economic self-interest of advanced countries to return forcibly displaced persons. Voluntary returns from rich countries to poor countries are rare; in most cases voluntary returns are unrealistic due to continued insecurity in countries of origin as well as differences in wages between developing and advanced countries. The author argues that: the effect of refugees on growth is often positive (by stimulating investment in the long term) and can be significant (if the refugee inflow is large enough, and especially in slow-growing mature economies); the effect of refugees on wages of unskilled workers, employment, and unemployment is likely to be mild; and the fiscal impact of refugee flows is likely to be small. The author makes the case that the costs of hosting asylum seekers and refugees are front-loaded, while the benefits accruing from their integration into the labor market and the host economy are often significant and typically take many years to materialize. Consequently, their return after a short stay may represent a costlier option than continuing to invest in their successful integration. Countries with a flexible labor market, strong investment climate, and a welcoming attitude to immigrants tend to see the economic benefits of refugee inflows materialize faster.