Does Foreign Aid Stop Refugee Flows? New Evidence for the Policy Debate

In the recent heated public debates in Europe about how to control refugee flows to Europe, it is often argued that foreign aid should be helpful to moderate such migration. In a new Discussion Paper of the Global Labor Organization (GLO), Axel Dreher, Andreas Fuchs and Sarah Langlotz provide strong empirical evidence using global data sources to suggest that while exogenous aid encourages recipient governments to support the return of citizens, we find no evidence that aid reduces worldwide refugee outflows in the short term; however, the authors find effects in the very long run.

GLO Fellow Axel Dreher  is associated  with the Alfred-Weber-Institute for Economics, Heidelberg University; KOF Swiss Economic Institute; CEPR; Georg-August University Goettingen; and CESifo.

GLO Fellow Andreas Fuchs is associated with the Research Center for Distributional Conflict and Globalization & Alfred-Weber-Institute for Economics, Heidelberg University.

GLO Fellow Sarah Langlotz is associated  with the Alfred-Weber-Institute for Economics, Heidelberg University.

Axel Dreher, Andreas Fuchs & Sarah Langlotz: The Effects of Foreign Aid on Refugee Flows, GLO Discussion Paper No. 195.  FREE DOWNLOAD: Download PDF


This article is the first to systematically study 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 exogenous 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. (Abstract marginally adapted from the DP.)

The study is in line with earlier research on South-North refugee migration. As Rotte, Vogler and Zimmermann (1997) have shown in their econometric analysis using refugee migration data to Germany, the issue had been discussed before. Short-term measures would not work, a long-term perspective would be needed.

Ralph Rotte, Michael Vogler & Klaus F. Zimmermann (1997), South-North Refugee Migration: Lessons for Development Cooperation, Review of Development Economics, 1 (1), pp. 99-115. Access.

Abstract: Migration has become a major concern of European development policies. By improving socio-economic and political conditions through development cooperation, a reduction of South-North migration flows is envisaged. This new approach is examined by analyzing the causes of asylum migration from developing countries to Germany. The econometric findings suggest that support of democracy, economic development and trade will not reduce migration, at least not in the medium-run. However, restrictive legal measures work. Migration control by international development cooperation therefore seems to need a long-term perspective.

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