The Economics of Forced Displacement: An Introduction

Forced displacement - defined as the displacement of refugees and Internally Displaced Persons (IDPs) due to violence – has reached an unprecedented scale and global attention during the past few years, particularly in the aftermath of the Syrian refugee crisis in 2011 and the European Union’s migration crisis in 2015. As this plight gained momentum, economics found itself unprepared to answer the basic questions surrounding refugees and IDPs. Few economists or institutions were working on forced displacement. Economic theory or empirics had little to offer in terms of articles published in journals. Data were found to be scarce, unreliable or inaccessible. Can economics rise to the challenge? Is the economics of forced displacement different from neoclas-sical economics? Can we use off the shelves models to study forced displaced populations? What are we missing to do the economics of forced displacement? What are the data constraints that limit economists in this work? This paper provides a first non-technical introduction to these topics. We argue that the modelling of utility, choice, risk and information in a short-term setting is the key to address the problem. Neoclassical economics lacks some of the theoretical ingredients that are needed but recent developments in game theory, neuroeconomics and behavioral economics have opened new horizons that make the task of modelling forced displacement within reach. Empirics is clearly limited by the scarcity of quality data but an example shows how welfare economists can start working with existing data. Economists have no excuse to maintain the status quo and should get on with the work on forced displacement.