This paper examines the impact of the Kakuma refugee camp in Kenya on the economic welfare of the host population. At the time the paper was written, the Kakuma camp accommodated 180,000 refugees, mainly from South Sudan and Somalia. The Kakuma camp is situated in the arid Turkana region in northwestern Kenya, one of the poorest and most sparsely populated regions of the country, where the main source of livelihood is livestock herding.
The authors draw on several sources of data including: (a) nighttime lights data from the United States Air Force Defense Meteorological Satellite Program, which is used as a proxy for economic activity; (b) registration census data from the Hunger Safety Net Programme (a cash transfer program for poor households in Turkana and other districts), which covers demographic data, livestock holdings, and an estimate of household consumption; (c) household surveys of refugees in Kakuma camp, local Turkana households near and far from the camp, and households from villages around two similar towns that are used as counterfactuals; and (d) agricultural and livestock prices from the Famine Early Warning System (FEWSNET) and Livestock Information Network Knowledge System, respectively.
- Economic activity increases with proximity to Kakuma refugee camp. A one percent increase in the distance to Kakuma (approximately one kilometer) at the mean level of refugee inflows (around 69,000 refugees) results in a 2.3 percent reduction in the nighttime lights index for villages with a population of 5,000 or more in 1989.
- Refugee inflows have positive but localized impacts on economic activity and consumption levels. A ten percent increase in the refugee population is associated with a 0.4 percent increase in the nighttime lights index for villages within ten kilometers of the camp. A ten percent increase in the luminosity index is associated with a 1.5 percent increase in the consumption index for villages with a population of 5,000 or more in 1989. This corresponds to an estimated 5.5 percent increase in consumption for every ten percent increase in the refugee population.
- Proximity to the refugee camp is associated with more low-skill jobs and wage labor, particularly for households with secondary education, and this effect dominates the impact of any labor competition from refugees.
- Per capita consumption near the camp is higher than consumption farther away. Household consumption within ten kilometers of the camp is 25 percent higher than in areas further away.
- Agricultural production occurs largely in the vicinity of the camp. Agriculture in the Turkana region occurs almost exclusively close to the refugee camp, suggesting that the presence of the camp incentivizes agricultural production.
- Livestock prices are positively correlated with the high refugee and aid presence. Although numbers of livestock are not higher closer to the camp, larger amounts of livestock sold in the immediate vicinity of the camp suggests that herding households benefit from the presence of the refugee market.
The authors conclude that there are benefits to host communities of living near refugee camps. In the case of Kakuma, host households living near the camp have higher consumption as refugee numbers increase. The analysis suggests two mechanisms driving this result: (1) increases in wage and agricultural employment opportunities; and (2) increases in the prices of livestock induced by refugee demand. However, the results may mask important heterogeneity, and some host households may not fare well. Some households may not be able to access employment opportunities due to their age or level of education, or they may not be able to farm or raise enough livestock, and so are negatively impacted by price increases.