This paper examines the economic and social impact of the Syrian war on Lebanon. The main channels are the reduction of trade, the large influx of refugees, and foreign assistance to refugees. The authors employ a dynamic general equilibrium model to capture forced displacement, discrimination and segmented labor markets. Key findings:
- The costs of lower trade and tourism in Lebanon are high given the importance of these sectors for the Lebanese economy.
- The influx of Syrian refugees yields a positive impact on growth, slightly reinforced by humanitarian aid flows.
- Limited or no adverse effects on high-skilled native workers, but a negative impact on the most vulnerable Lebanese workers.
- When aid takes the form of investment subsidies, significantly better growth and labor market prospects arise.