What We Have Learned from Studies of Refugees and Displaced Populations in Developing Countries

By Anubhab Gupta

Anubhab Gupta is an assistant professor in the Department of Agricultural and Applied Economics at Virginia Tech. He conducts research at the intersection of international development and agricultural policy in both developed and developing country contexts. His primary research areas include impact evaluations of development projects, agricultural market structures in rural settings, migration and population displacement driven by conflict and climate change, and the general equilibrium effects of policies. Gupta regularly collaborates with international organizations such as the United Nations Food and Agriculture Organization, the World Bank, and the World Food Programme.

Summary

A decade of field research across East Africa finds that displaced people who are permitted to participate in local economies generate measurable economic benefits for host communities. Cash assistance produces larger income multipliers than in-kind assistance, and directing aid to women amplifies these effects. Access to land and financial literacy training fosters refugee self-reliance and deeper integration. Refugee-driven infrastructure investments produced benefits lasting decades after the population moved on. For developed countries, immigration policies focusing on productive integration, backed by work authorization and cash-based aid, have the potential for long-term community development.

Background

In the first quarter of the twenty-first century, climate change and conflicts have taken their hardest toll on the most vulnerable populations living in some of the poorest parts of the world, leaving millions homeless and forced to flee to other parts of their countries as Internally Displaced Persons (IDPs) or as refugees to neighboring countries. Often described by the United Nations High Commissioner for Refugees (UNHCR) as “people of concern,” the total number of refugees, asylum seekers, and IDPs has increased six-fold, from approximately 22 million to over 117 million by mid-2025 (UNHCR 2025), in contrast to a one-third growth of the global population between 2000 and 2025. Most of the world’s displaced people, around 90 percent, are hosted not by wealthy nations but by some of the poorest countries (World Bank Group 2026). Along with the national governments that host displaced people, several international organizations, such as CARE International, International Organization for Migration, International Rescue Committee, UNHCR, and UN World Food Programme (WFP) lead the efforts to provide humanitarian assistance in the form of shelter, food, protection, healthcare, education, and resettlement. 

Beginning in the early 2010s, a body of rigorous empirical research emerged that examined how displaced populations interact with the host economies that surround them. This body of research aimed to understand the pressing policy questions around the arrangement of hosting displaced people: who gains, who loses, by how much, and under what conditions? In this outreach brief, I review studies spanning countries in East Africa, including the Horn of Africa and the Great Lakes region, which host around 5.7 million refugees and 19 million IDPs. Virginia Tech’s researchers, including faculty and graduate students, have played a central role in leading the efforts on several of these studies. Using state-of-the-art estimation methodologies from general equilibrium simulations to panel econometrics to satellite remote sensing, these studies constitute the most rigorous body of evidence yet assembled on the local economic impacts of large-scale forced migration in low-income settings. This summary distills what that research found, what it did not find, and what, carefully and with attention to context, developed countries, including the United States, might learn from it.

What We Found

Finding 1: Refugee Economies Form Spontaneously

One of the most striking observations from our research in Rwanda (Alloush, Taylor, Gupta et al., World Development, 2017) was the way economic activity developed within refugee camps. The three Congolese refugee camps in Rwanda we studied were functioning economies with internal labor markets, petty trade, food processing, barber shops, and small retail businesses. Refugees with various skills and endowments engaged in economic activities based on comparative advantage, i.e., those near agricultural host economies supplied farm labor, those near commercial towns entered retail and services. Since market forces were allowed to operate, the refugee economy mirrored the structure of the surrounding host economy. So, displaced people are not just passive recipients of aid, but economic agents who seek productive employment, create businesses, and respond to incentives. The question for policy is not whether refugees will participate in economic life but how institutions and rules governing refugees facilitate participation and channelize their entrepreneurship and creativity to economic productivity.

Finding 2: Type of Aid and Who Receives the Aid Matter

Perhaps the most practically consequential finding in the last decade comes from another study in Rwanda (Taylor, Filipski, Alloush, Gupta et al., Proceedings of the National Academy of Sciences, 2016), which shows that cash transfers generate higher income multipliers in the surrounding local economy than in-kind food transfers. Refugees receiving cash aid generated income multipliers of $1.51 to $1.95 per dollar of aid compared to a $1.19 multiplier when they received in-kind food aid, and much of the impact of food aid remained within the refugee camp rather than flowing into the host community. The mechanism is straightforward. Cash recipients created demand for food, retail, and other services that boosted local economy production, creating significantly more economic benefits in host communities surrounding the cash-refugee camps. On the other hand, refugees receiving in-kind food assistance (often grown in higher-income countries such as the United States and the United Kingdom) had to sell their food rations in local markets at prices well below retail price so that they could get cash for non-food purchases.

In an ongoing study (Kumar, Gupta et al., working paper, 2026) in two refugee camps in Northern Kenya, we find corroborating evidence that cash assistance boosts the local economy more than in-kind assistance. More interestingly, we also find evidence that income multipliers are more than 20 percent higher when assistance is given to female-headed households compared to male-headed households. This differential impact is because female-headed refugee households allocate a larger share of their expenditure to locally produced food, directing a greater fraction of their assistance back into the local economy.

The policy lesson is not simply that cash is better than food aid because there are contexts in which food aid is essential, but that transaction costs and market exclusion have measurable economic consequences that compound across an entire local economy. Moreover, the economic impact of hosting refugees depends on the gender of the refugee household head since female-headed refugee households’ expenditure patterns vary meaningfully from those of their male-headed counterparts.

Finding 3: Productive Resources and Complementary Assistance Programs Can Amplify Welfare and Foster Self-Reliance

Our research on refugees in Uganda introduced two dimensions that were absent in Rwanda and Kenya. First, we learned what happens when displaced people receive access to productive resources, such as agricultural land, and second, we studied whether complementary programs, such as training refugee youth on financial literacy, change refugees’ aspirations and improve their self-reliance and willingness to integrate with the host communities. The quasi-random nature of land allocation to refugees in the Rwamwanja refugee settlement in Southwest Uganda allowed us to estimate that receiving a cultivable plot raised refugee household income by 49 to 57 percent, increased local agricultural production, and reduced dependence on UN food assistance (Zhu, Gupta et al., American Journal of Agricultural Economics, 2024). We found that refugees farmed more intensively than neighboring host-country households, applying more labor per hectare and generating higher yields, likely because barriers to other employment opportunities raised the shadow value of agricultural work. In another study (Das, Gupta, et al., The Journal of Development Studies, 2025), we found that a financial literacy training program given to refugee youth in Uganda improved their financial knowledge and financial behavior, which are important for saving decisions, responsible borrowing, business operations, and various other life goals, including their confidence in integrating with the host population.

Giving productive resources to refugees along with complementary services shifts their relationship with host communities from being mere consumers in the local economy to both consumers and producers who interact and integrate meaningfully with the hosts, that strengthen economic and cultural linkages.

Finding 4: The Benefits Can Outlast the Displaced Population Itself

Another striking finding in this literature comes from Tanzania. Maystadt and Duranton (Journal of Economic Geography, 2019) used a 20-year household panel to examine the long-run effects on Tanzanian host communities of massive but temporary refugee inflows from Burundi and Rwanda in 1993–1994. Not only did refugee presence have positive effects on host-community welfare during the inflow, but the effects also grew stronger over time, well after the refugees had returned home. By 2010, more than 15 years after the peak inflow, welfare impacts were larger than in 2004.

The mechanism was investment in transport infrastructure. The large-scale refugee presence created sufficient economic demand to justify road construction and logistical improvements that permanently reduced transaction costs and connected previously isolated farming communities to broader markets. This is a development economics result as much as a migration result: a temporary population shock, if large enough, can shift a local economy onto a permanently higher trajectory by triggering investments that lower the cost of economic exchange. The displacement was temporary; the infrastructure was not.

Finding 5: The “Cost of Inaction” is Also Measurable

Ongoing research in Somalia and Uganda (Gupta et al., working paper, 2026) examines a less-studied dimension: what happens when humanitarian support is withdrawn from conflict-affected and displaced populations. Since the onset of the COVID-19 pandemic, the Russian invasion of Ukraine, and other economic disruptions that followed the pandemic, international organizations have been financially strained to continue their assistance programs. In several instances, funding has been curtailed and disrupted, causing unprecedented shortfalls (up to 40 percent), which have forced, or are forcing, agencies such as the WFP to cut or suspend aid to millions of people across the globe (WFP 2026). Our preliminary findings confirm what economic theory would predict that the “costs of inaction” compound, leading to deteriorating food security, worsening market linkages, and pushing people into poverty traps. The funding shortfalls will likely have severe long-term consequences for the well-being of the most vulnerable and impoverished populations beyond the immediate short-run humanitarian crisis.

What We Do Not Know and Remains to be Understood

Despite the evidence provided above from rigorous academic and policy-relevant research in the last 15 years on the interactions of refugees with host communities and their economic impact, several important questions remain unanswered:

• First, the studies focused on income and production impacts, and in some cases non-economic outcomes. Nonetheless, they did not measure the costs and benefits of public services such as schooling, clinics, water, and other resources provided to displaced populations. The fiscal burden in carrying out humanitarian assistance to the displaced populations, including the costs incurred by host communities who provide refuge and space for internally displaced people, asylum seekers, and refugees, needs to be more accurately accounted for and balanced with the benefits of these programs.
• Second, the literature has focused on measurable income, consumption, prices, and labor market outcomes over the horizons of one to twenty years. Longer-run effects on institutional capacity, social cohesion, and governance, both positive and negative, are far less well understood.
• Third, the above studies focus on remote, rural, and low-income regions of Sub-Saharan Africa, which differ substantially from urban and peri-urban displacement contexts, e.g., Ukrainian refugees in neighboring European countries, where the mechanisms identified (demand multipliers, labor complementarity) operate in different ways. The magnitudes of impact depend not only on local conditions such as markets, infrastructure, and institutions, but also on social structures that define the interactions between the displaced and the natives.
• Fourth, refugee settlement locations are not randomly assigned, but determined politically and administratively by UN agencies in consultation with national and local governments. While studies in this literature use a variety of strategies to address selection, such as instrumental variables, difference-in-differences, and quasi-experimental designs, they all suffer from identification challenges. The convergence of findings across independent studies using various methods in different countries strengthens confidence, but an appropriate scientific stance would be to treat these findings as robust evidence of the direction of effects and approximate, but not precise, causal estimates of the magnitudes of effects.

What Developed Countries Can Learn 

It is inappropriate to translate the evidence from low-income African settings to wealthy Western European or North American contexts because the magnitude of effects will largely differ. Nonetheless, some mechanisms of hosting displaced populations will operate in similar ways, while, of course, others will not. The following lessons can be drawn from the research in Africa that may be valuable for developed country contexts, along with the caveats that need equal attention:

Lesson 1: How You Support Displaced People Matters

The finding that cash aid outperforms in-kind food aid in terms of local economic multipliers has direct relevance to aid program design in high-income countries. In-kind support, such as housing vouchers restricted to particular units, food pantries, and clothing provisions, imposes transaction costs and market restrictions on beneficiaries that reduce their economic contribution to surrounding host communities. Direct cash transfers or flexible vouchers that allow recipients to participate in local markets can generate substantially larger local economic activity. This argument is not to say that in-kind support is inappropriate, but that the default toward in-kind assistance has measurable economic costs for hosting communities.

Lesson 2: Legal Status and Work Authorization Are Determining Factors

The evidence provided from the African setting strongly points to a single most important determinant: whether displaced people were legally permitted to contribute to local economies. In Rwanda, freedom of movement and the right to engage in local economic activities generated multipliers twice as large as in the food-restricted camps. In Uganda, the right to work in local labor markets and access to agricultural land transformed refugees from aid-dependent households into net contributors to host-country agricultural output. For developed countries, this finding is directly applicable to labor market authorization for asylum seekers, refugees, and migrant workers. The period during which migrants are legally residents but not authorized to work represents an economic benefit forgone—the host country that provides refuge foregoes the productive contribution the migrant could otherwise bring in the local economy; delaying work authorization also means that the host country foregoes tax revenues. The African evidence suggests that work authorization, even in imperfect labor markets, generates economic returns that substantially offset the cost of supporting displaced populations.

Lesson 3: Productive Integration Has Higher Returns than Containment

The findings from Uganda and Tanzania suggest that policies that give displaced people resources to be productive, such as land, training, stable legal status, skills, etc., generate larger and more durable economic benefits for host communities than policies that manage displacement through containment and minimal provision. This does not mean that integration is without cost or tension. The pressure on food prices, competition with low-skilled native workers, and local population resentment are real and require policy attention. The lesson is not that integration is costless, but that the returns to integration substantially exceed the returns to containment when costs and benefits are counted comprehensively.

Lesson 4: General Equilibrium Thinking is Essential for Policy Evaluation

Perhaps the most important methodological contribution of this body of research is demonstrating that partial equilibrium analysis, which counts only the direct benefits on the displaced populations or single markets, systematically underestimates the total economic impact of human displacement. When refugees spend cash on food, prices in local food markets rise, which raises the income of food-selling farmers, allowing them to spend more, in turn generating further rounds of impact and economic multipliers throughout the local economy. These multiplier effects are quantitatively important since they are often larger than the direct income effect on refugees themselves, and invisible to analyses that consider only the direct impacts.

The lesson transfers directly to policy evaluation in developed countries. Cost-benefit analyses of migration programs that count only fiscal transfers without modeling the “spending” multiplier, the labor market complementary effects, and productivity gains from market participation will typically understate the economic contribution of migrant populations and overstate the net costs of supporting them.

Conclusion

A decade of rigorous field research across Africa delivers a consistent and actionable message that displaced populations are not an economic burden but a productive resource that can be unlocked for potential local economic benefits. When refugees are permitted to participate in host-country economies through work authorization, access to land, and flexible aid, they generate positive spillovers for the communities around them. Those spillovers grow larger when aid is delivered in cash, directed to women, and paired with training and productive resources. And as the Tanzania evidence shows, the benefits can outlast the displaced population itself, through lasting investments in infrastructure and market connectivity.

These findings do not settle every debate about immigration and displacement policy, nor do they translate directly from low-income African settings to high-income Western countries. The magnitudes will differ since the institutions are different, and important questions about fiscal costs, social cohesion, and long-run governance effects remain underexplored. These limitations prevent drawing conclusions about the potential effects of hosting displaced populations in Western economies.

But what the evidence does establish is that the direction of the effect and the mechanisms that drive it are robust across independent studies, methods, and countries. Containment costs more than it saves. Integration, if done well, could pay for itself. For policymakers in any country grappling with forced displacement, that is a finding worth taking seriously. 

References:

• Alloush, M., Taylor, J. E., Gupta, A., Valdes, R. I. R., & Gonzalez-Estrada, E. (2017). Economic life in refugee camps. World Development, 95, 334-347.
• Das, N., Gupta, A., Mingo, C., & Zhu, H. (2025). Impacts of financial literacy training on refugee youth outcomes. The Journal of Development Studies, 61(11), 1777-1801.
• Gupta, A., Kumar, D., Qi, T., Kagin, J., Taylor, J.E., & Krishnaswamy, S. (2026). The Cost of Inaction: Impacts of WFP Refugee Assistance Shortfalls on Food Security Outcomes. Working Paper.
• Kumar, D., Gupta, A., Kagin, J., & Taylor, J.E. (2026). A Gendered Approach to Economic Impacts of Refugee Aid in Kenya. Working Paper.
• Maystadt, J. F., & Duranton, G. (2019). The development push of refugees: Evidence from Tanzania. Journal of Economic Geography, 19(2), 299-334.
• Taylor, J. E., Filipski, M. J., Alloush, M., Gupta, A., Rojas Valdes, R. I., & Gonzalez-Estrada, E. (2016). Economic impact of refugees. Proceedings of the National Academy of Sciences, 113(27), 7449-7453.
• UNHCR (2025). Mid-Year Trends: Key displacement and solutions trends in the first half of 2025. https://www.unhcr.org/mid-year-trends
• World Bank Group (2026). Forced Displacement: Fragility, Conflict and Violence. http://worldbank.org/ext/en/topic/fragility-conflict-and-violence/forced-displacement
• World Food Programme (2026). Funding shortfalls put lifelines at risk for Sudanese refugees in Chad. https://www.wfp.org/news/funding-shortfalls-put-lifelines-risk-sudanese-refugees-chad
• Zhu, H., Gupta, A., Filipski, M., Valli, J., Gonzalez‐Estrada, E., & Taylor, J. E. (2024). Economic impact of giving land to refugees. American Journal of Agricultural Economics, 106(1), 226-251.

For questions about this article, contact Anubhab Gupta.

Recommended citation format: Gupta, A. “What We Have Learned from Studies of Refugees and Displaced Populations in Developing Countries." Campus to Commonwealth 2(4). Department of Agricultural and Applied Economics, Virginia Tech. June 2026.

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