In 2016, Kenya hosted more than half a million registered refugees, roughly a third of whom (more than 190,000 people) were living in the Kakuma refugee camp, located in in Kenya’s northwestern Turkana County. Turkana County is one of Kenya’s most impoverished and marginalized counties, with some of the worst development indicators in the country. In 2016, refugees accounted for 15 percent of the county’s population.
This report analyzes the economic and social impact of refugees in Kenya’s Kakuma refugee camp on host communities in Turkana region. The authors also assess policies with the potential to magnify the positive impacts of refugees while reducing the negative impacts.
The authors analyze the impact of the refugee camp on host communities through both market and non-market mechanisms. Market mechanisms are those that affect welfare through prices of goods, services, labor, and other factors of production. Non-market mechanisms are those that affect welfare through goods and services for which prices do not exist, such as environmental spillovers from the camp, as well as social, cultural, and security changes. The authors assess market-based welfare changes using a multi-sector general equilibrium model and an empirical approach that focuses on channels of transmission and the aggregate impact by using a set of counterfactuals. Non-market welfare effects are assessed through ethnographic research.
The economic analysis relies on a variety of data sources including the Kenyan census, the registration census conducted by the Hunger Safety Net Program (HSNP), price data from the Famine Early Warning System (FEWSNET) and Livestock Information Network Knowledge System, UNHCR refugee registration data, and WFP statistics.
- The refugee presence has a beneficial and permanent impact on Turkana’s economy. It boosts Turkana’s Gross Regional Product (GRP) by over 3 percent, income per “local” person increases by 0.5 percent, and total employment increases by about 3 percent. However, the impact of the refugee presence on the rest of Kenya is negligible.
- Unlike tradable sectors, non-tradable sectors (which constitute a much larger share of the economy) benefit from the refugee presence as measured by their impact on prices, wages, and employment. In the long-term, income in non-tradable sectors (such as housing, land, restaurants, and hotels) grows by over 7 percent, whereas it shrinks by about 7 percent in tradable sectors. Employment in non-tradable sectors increases by 6.5 percent compared to a contraction of 6.3 percent in tradable sectors.
- The refugee presence increases consumption, self-reported incomes, and asset ownership of the Turkana. Consumption measures within 5 km of the camp are up to 35 percent higher than in other parts of the county, and those who live close to the camp tend to have higher income and assets. However, there is heterogeneity in the impact of the refugee presence on host community incomes and consumption. Households with access to small businesses and farm incomes are more insulated from short term shocks, while wage-earner and animal-selling households suffer more from them.
- There is no clear evidence to suggest that the refugee presence has pushed populations away or pulled them in.
- The impact on agriculture and housing is positive, but livestock, the main livelihood of the Turkana region, is adversely affected. Agriculture benefits (marginally) from the presence of refugees. Livestock holdings, the main livelihood of the Turkana region, decrease near the camp.
- The refugee presence indirectly influences the housing market.
- The Turkana have (mostly) positive perceptions of refugees, and these diminish with distance from Kakuma refugee camp. The likelihood that a member of the host community has negative perceptions of the refugees does not vary significantly with distance. However, the likelihood that a member of the host community has positive perceptions of the refugees decreases with the distance from the camp.
- The refugee presence seems to benefit Turkana women more than Turkana men. Turkana women benefit the most from the refugee and UN/NGO presence as they can develop diverse subsistence strategies that includes providing labor to the refugees (housework, fetching water/food) and goods (charcoal, firewood, agricultural crops such as sorghum) in return for both food and cash, which enables them to feed their children and families.
- The refugee presence is highly correlated with greater physical wellbeing of the host community, but not always mental wellbeing. The average body mass index (BMI) and sum of skinfold (SSF) values for both men and women were higher in Kakuma (presence of refugees) and Lorugum (presence of development) compared to Lorengo or Lokichoggio (no development), suggesting that the Turkana residents of these locations have far greater access to nutritional security and health. However, the presence of refugees may lead to differences in psychosocial stress within the host community. Turkana men report more “worries” than women, as do the middle-aged and the elderly.
The analysis shows that the refugee presence in Kakuma has had a nuanced economic and social impact on host communities. The overall impact of refugees in Kakuma is positive, but there are segments of the host population and parts of the economy that do not benefit from the refugee presence.
The authors then assess the likely impact of three potential policy options in terms of their transitory and permanent effects on host community welfare, with the status quo ‘encampment policy’ as a baseline. The three policy options are: (1) limited (economic) integration scenario, in which skilled refugees are allowed to work outside the camp, anywhere in Kenya, while unskilled refugees remain in the camp, and both refugee types continue to receive the same levels of transfers (aid and remittances); (2) full (economic) integration scenario, in which all refugees, skilled and unskilled, are granted legal permits to live and work anywhere in Kenya, either continuing to receive the same level of transfers or no longer receiving transfers; and (3) decampment scenario, in which Kakuma refugee camp is closed and all refugees are moved to other countries.
- Integration boosts local income for about 25 years; decampment reduces it permanently. Both economic integration scenarios (limited and full) boost per capita income in Turkana. In contrast, decampment leads to permanent income loss in Turkana.
- Prices in Turkana surge temporarily with integration but collapse with decampment. In both economic integration scenarios, the price of non-tradables in Turkana initially increases and then falls below integration levels in the long term. In contrast, decampment leads to a complete loss of demand that was generated by the refugees.
- Integration (marginally) increases economic activity in Kenya in the long-term. Integrating refugees boosts economic activity across Kenya.
- All three scenarios lead to a decline in real wages in Turkana, but the magnitude depends on the skill set of refugees being integrated and channels of impact. When only skilled refugees are integrated, they increase productivity and wages of unskilled workers and reduce the wages of skilled workers. When all refugees join the labor force, the net effects vary.
- Aid complements and magnifies the positive effect of refugees, however, in the absence of aid, refugees can still make a positive contribution.
The authors conclude that economic integration, which increases per capita host incomes by 6 percent, is the appropriate policy for maximizing the beneficial impact of refugees. Encampment, the status quo, concentrates both gains and losses in the vicinity of the camp, which reduces potential aggregate gains for the rest of the economy outside Kakuma, while increasing gains for those in the vicinity of the camp. Integrating refugees into the economy generates positive economic effects in aggregate terms and also diffuses such effects across all regions in Kenya. Limited integration does this partially. In contrast, decampment leads to both a permanent income loss in Turkana and a collapse in prices. The authors note that these results are contingent on institutional and market factors such as transfers (aid and remittances), market power, and skills acquisition.