Refugees, trade, and FDI

Dany Bahar, Christopher Parsons, and Pierre-Louis Vézina

Oxford Review of Economic Policy, Volume 38, Issue 3 (2022), Pages 487–513


This article discusses trade and investment links forged by refugees between their countries of resettlement and countries of origin, drawing on findings from the literature on migrants and refugees.  

Main points: 

  • There are many historical examples of refugees spreading new knowledge and technology, with positive economic dividends for host societies.  
  • Rather than cutting links with their home countries, evidence indicates that refugees maintain strong links with their home countries, with positive potential impacts on trade.  
  • A growing body of evidence suggests that refugees can contribute to the development of their home nations. The literature suggests that migration has a positive impact on trade, and that migrants’ ability to stimulate trade is a function of their knowledge of foreign markets coupled with their ability to integrate into their host-country communities. Refugees might even exert more influence on trade and investment when compared to migrants more broadly, because they often constitute new populations in their host countries and have greater incentives to invest in human capital.  
  • Effects on trade and investment might be larger in developing countries of origin, characterized by weak institutions, in which contract enforcement is more costly and trusted networks more valuable. On the other hand, trade and investment in conflict-affected countries may be constrained due to political upheaval or an absence of the rule of law. 
  • Refugees’ remittances play a potentially important developmental role. Refugees send significant remittances home. Some evidence even suggests that refugees remit more frequently than other types of migrants. The exact role that refugee remittances play in facilitating FDI and trade flows remains largely unstudied.  
  • Policies in both countries of origin and countries of asylum can foster refugees’ economic impact on trade and FDI. Examples include: (1) establishing regulations and policies that differentiate between refugees and migrants, providing refugees with full access to local labor markets; (2) reducing the costs of remittance flows; (3) leveraging refugee diasporas; and (4) providing suitable incentives for refugees to return home in post-conflict situations. 

The authors conclude that refugee represent enormous potential to contribute to development and post-conflict reconstruction of their home countries. They note that, “refugees and their associated diasporas represent serious opportunities—if accompanied by the right policies—to realize important economic gains that in the medium to long run might be expected to exceed any short-run costs of ‘accommodating’ them.”