Macroeconomic Effects of Forced Displacement in Sub-Saharan Africa

This paper estimates the macroeconomic effects of forced displacement on host economies in SubSaharan Africa, drawing on cross-country panel data and country case studies of Burkina Faso, South Sudan, and Uganda to provide granular evidence on the consequences of spatial concentrations of forcibly displaced persons within countries. Estimates from a difference-in-differences local projections (LP-DiD) framework do not suggest that large refugee inflows significantly affect host-country GDP, inflation, or the current account balance over a five-year horizon. The effects on the primary fiscal balance also appear to be muted, yet this masks offsetting fiscal dynamics: government expenditures rise and fiscal revenues increase (mainly through taxes). These results are robust to restricting the control group to Sub-Saharan African economies. Under a broader treatment definition that captures the total displaced population (refugees and internally displaced persons), the GDP response turns significantly negative and intensifies with displacement severity, though this estimate is best interpreted as an upper bound because it cannot be fully separated from the effects of conflict itself that generates displacement. The cross-country findings are consistent with the case studies, which indicate generally muted effects on aggregate food inflation and wages. Beneath this muted aggregate response, however, a consistent pattern emerges across cases: prices of imported and processed staples rise, while those of locally produced cereals stay flat or fall. The case studies also yield mixed evidence regarding the impacts of displacement inflows on consumption and labor force participation, with such inflows reducing host employment in Burkina Faso but raising it in Uganda.