The Impact of Refugees on Income Inequality in Developing Countries by Using Quantile Regression, ANN, Fixed and Random Effect

Abstract

Refugees affect the hosting countries both politically and economically, but the size of impact differs among these societies. While this effect emerges mostly in the form of cultural cohesion, security, and racist discourses in developed societies, it mostly stands out with its economic dimension such as unemployment, growth, and inflation in developing countries. Although different reflections exist in different societies, the reaction is expected to be higher if it affects social welfare negatively. Accordingly, one of the parameters that should be addressed is the effect of refugees on income distribution since the socio-economic impact is multifaceted. In this study, the effect of refugees on income inequality is analyzed by using quantile regression with fixed effects and Driscoll–Kraay Fixed Effect (FE)/Random Effect (RE) methods for the period of 1991 to 2020 in the 25 largest refugee-hosting developing countries. According to the findings of the study, the functional form of the relationship between refugees and income inequality in the countries is N-shaped. Accordingly, refugees first increase income inequality, decrease it after reaching a certain level, and then start increasing it, albeit at a low level.