Editor’s note: This post is part of a series showcasing Barcelona GSE master projects by students in the Class of 2016. The project is a required component of every master program.
Nagham Abdel Ahad and Gleb Bychkov
Macroeconomic Policy and Financial Markets
In the light of the Syrian crisis which erupted in March 2011 and which is still on-going, many outcomes were and are still being produced. In this paper, we show particular interest in the refugee crisis that developed after the fast-tracked evolution of events in Syrian. More precisely, we shed light on the case of Lebanon, the small country on the Mediterranean, having an estimated native population of 4.55 million and hosting, at present, an estimated 1.15 million Syrian refugees on its territories, that is, more than 25% of its original population.
Our study focuses more specifically on the negative spillovers of the Syrian refugee inflow on the Lebanese labor market. Our objective is to build a model which we use to determine both the steady state in the Lebanese labor market prior to the Syrian refugee crisis and the equilibrium in the Lebanese labor market post the escalation of the refugee crisis. We therefore approach the dynamics of the labor market observing its reaction to the positive labor supply shock generated by the refugee influx. After calibrating the model, we watch closely the changes in our main variables of interest, namely, unemployment rates and wage levels, before and after the crisis.
In addition, we compare the results and the values our model gives for our variables of interest with the actual figures and data published or predicted by international reputable institutions, such as The World Bank and the Food and Agriculture Organization of the United Nations, for these same variables. Accordingly, we evaluate our model showing how far it succeeds in reflecting the reality of the situation and thus in predicting and generating figures as close as possible to the actual and true ones.
Refugee inflows into host countries and communities can have significant impacts on these hosts on many levels. In our paper, we approach this issue from an economic perspective. More specifically, we focus on labor economics and labor market dynamics. In this context, we consider the case of the Lebanese labor market invaded by Syrian refugees who have fled to Lebanon because of the on-going war in Syria. We build a model, we calibrate it, we get the results, and we discuss them and use them to evaluate the performance of our model.
While The World Bank estimates a 20 percent unemployment rate in Lebanon post-crisis (almost double the rate pre-crisis), our model estimates an approximate 6.68 percent.
We proceed afterwards with a thorough discussion centered around these contradictory observations and we also go over a couple of limitations our model has, all of which might be able to account to some extent to the inconsistency in figures. This idea is interesting as it opens horizons and broadens the scopes for this work as one might expand the model so as to include an informal sector or additional distinctions between Lebanese native workers and Syrian migrant workers. We did not engage in doing this activity given the time constraints that we had. However, such expansions of the model can add great value to this work and can pave the way for further understanding and more successful outcomes.
We view our paper as a first step towards developing a flexible quantitative model that integrates opposing forces and that allows for a proper welfare analysis. More analysis is clearly welcome.