The Economic Consequences of Forced Displacement

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. 1 German Institute for Economic Research, Berlin, Germany, [email protected]. I would like to thank Ambrose Olaa, former Community Development Officer of Kitgum, as well as a number of anonymous local leaders in Lira and Gulu for their help in understanding the history of displacement in northern Uganda. Further thanks go to my field research staff Filder Aryemo, Oneka Johnson Brian and Komakech Polykarp. Thanks as well to Christohper Blattman of Columbia University and Michelle Garfinkel, David Neumark and Stergios Skaperdas of the University of California, Irvine, for their input and advice. I also appreciate comments from participants at the Royal Economic Society and American Economic Association 2011 annual meetings. Funding for this research was provided in part from the European Community's Seventh Framework Programme through its Marie Curie Initial Training Network programme under grant agreement n° 263905 (TAMNEAC). Any errors are entirely my own. H i C N Households in Conflict Network The Institute of Development Studies at the University of Sussex Falmer Brighton BN1 9RE www.hicn.org This publication is an output of TAMNEAC, an Initial Training Network supported by the European Commission’s Seventh Framework Programme. www.tamneac.eu