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Policy Research Working Paper 9613 : Welfare Impact of Hosting Refugees in Ethiopia

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Ashenafi Belayneh Ayenew

Abstract

This paper examines the welfare impact of hosting refugees in Ethiopia, one of the largest refugee-hosting countries worldwide. Identification comes from a large spatial difference in within-village temporal changes in refugee intensity, following a recent upsurge in the flow of refugees into the country. The findings reveal different implications depending on the type of household welfare metric. While reducing consumption expenditure per capita and increasing the probability of falling into consumption poverty, hosting refugees has no effect on wealth and the status of wealth poverty. Decomposing consumption expenditure per capita into food, education, and other nonfood components, the results further reveal that hosting refugees alters the composition of consumption, as it solely affects food consumption expenditure. The consumption effects prevail in rural areas with no effects in urban centers while no heterogeneity is found concerning wealth and wealth poverty results. Key mechanisms explaining the adverse consumption effects include displacement of hosts from salaried employment and a spike in prices of agricultural inputs but not changes in the extent of societal cooperation.