This paper examines the long-term impact of the 1923 forced resettlement of 1.2 million Greek-Orthodox citizens of Turkey to Greece in the aftermath of the Greco-Turkish war. The mass resettlement of refugees increased the host population in Greece by more than 20 percent within a few months. Refugees resettled in rural areas were provided with arable land parcels, farm inputs and cattle, in addition to individual houses. The analysis is based on a geocoded dataset that combines historical data on refugee settlement with contemporary socio-economic outcomes at a disaggregated administrative level. The authors employ several empirical strategies that rely on different margin of spatial and temporal variation in the refugee inflow.
- In places of resettlement, refugees contributed to higher industrialization and structural transformation away from agriculture. Places of refugees’ resettlement display higher level of prosperity in 1991 relative to other localities without refugees: conditional on geographical and pre-resettlement characteristics, the former have higher night light luminosity, dwelling with better amenities (e.g. electricity), a larger manufacturing sector and higher average earnings.
- Resettlement produced smaller economic gains in places where the local population was predominantly refugees, as well as in municipalities where refugees were segregated into separate villages. There is a hump-shaped relationship between the share of refugees and long-run prosperity, with prosperity first increasing and then declining when refugees make up more than 40 percent of the local population. The economic gains of the resettlement were also lower in places where refugees were clustered in separate enclaves and where their skills were less easily transferable. This highlights the crucial role of social interactions and knowledge sharing, which were facilitated by the fact that refugees and natives often spoke the same language and shared the same religion.
- No evidence of negative spillover effects in nearby localities, suggesting that the results are not driven by the reallocation of economic activity into places of resettlement, but rather by the creation of new activity.
- Long-run benefits in rural localities of northern Greece appear driven by the transfer of new specific knowledge in textiles and the provision of new agricultural know-how by mostly farmer refugees. Resettlement led to the expansion of the textile sector and manufacturing especially in places with a greater suitability for the cultivation of textile crops (e.g. cotton), where refugees’ knowledge could be more effectively transferred and employed. The resettlement produced smaller economic gains in localities where the interactions between refugees and natives were less likely, either because the local population was predominantly refugee and thus less diverse in terms of skills—hence the hump-shaped relationship between the refugees’ share and long-run prosperity—or because of a higher segregation of refugees into separate villages within the same municipality. There was no empirical evidence for alternative mechanisms such as agglomeration economies, investments in public infrastructure or the economic integration of second-generation refugees.
The authors conclude that by providing complementary (not necessarily superior) knowledge, refugees can generate significant benefits in the long run, even when they do not bring higher human capital, and provided that sufficient investments are made in their resettlement. The author suggests that resettlement policies should avoid clustering refugees in separate enclaves while targeting locations where newcomers’ skills are the most easily transferable.