The Effects of Foreign Aid on Refugee Flows

49 Pages Posted: 9 Apr 2018

See all articles by Axel Dreher

Axel Dreher

Heidelberg University

Andreas Fuchs

University of Goettingen (Gottingen) - Faculty of Economics and Business Administration; Kiel Institute for the World Economy

Sarah Langlotz

Heidelberg University

Multiple version iconThere are 2 versions of this paper

Date Written: February 15, 2018

Abstract

This article analyzes whether foreign aid affects the net flows of refugees from recipient countries. Combining refugee data on 141 origin countries over the 1976-2013 period with bilateral Official Development Assistance data, we estimate the causal effects of a country’s aid receipts on both total refugee flows to the world and flows to donor countries. The interaction of donor-government fractionalization and a recipient country’s probability of receiving aid provides a powerful and excludable instrumental variable, when we control for country- and time-fixed effects that capture the levels of the interacted variables. Although our results suggest that aid induces recipient governments to encourage the return of their citizens, we find no evidence that aid reduces worldwide refugee outflows or flows to donor countries in the short term. However, we observe long-run effects after four three-year periods, which appear to be driven by lagged positive effects of aid on growth.

Keywords: foreign aid, Official Development Assistance, migration, refugees, displaced people, humanitarian crises, repatriation policies

JEL Classification: F220, F350, F590, H840, O150, O190

Suggested Citation

Dreher, Axel and Fuchs, Andreas and Langlotz, Sarah, The Effects of Foreign Aid on Refugee Flows (February 15, 2018). CESifo Working Paper Series No. 6885. Available at SSRN: https://ssrn.com/abstract=3156863

Axel Dreher (Contact Author)

Heidelberg University ( email )

Grabengasse 1
Heidelberg, 69117
Germany

HOME PAGE: http://www.axel-dreher.de

Andreas Fuchs

University of Goettingen (Gottingen) - Faculty of Economics and Business Administration ( email )

Platz der Goettinger Sieben 3
Goettingen, 37073
Germany

Kiel Institute for the World Economy ( email )

Kiellinie 66
Kiel, Schleswig-Hosltein 24105
Germany

Sarah Langlotz

Heidelberg University ( email )

Grabengasse 1
Heidelberg, 69117
Germany

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