Rethinking Forced Displacement: Security and Growth in Selected European Host States

Abstract

This study (re)examines the complex relationship between forced displacement (FD) and economic growth through the lens of security and political stability in selected European countries from 1960 to 2023. Building on a composite political instability (PI) index that captures both violent and non-violent forms of instability, we employ a simultaneous equations model with panel instrumental variable estimation techniques to address endogeneity and measurement challenges. Our findings reveal that FD generates dual effects on host states: initially, it strains resources and exacerbates PI, but when refugees can access economic opportunities, FD can foster long-term economic growth and strengthen social cohesion. The dynamic relationship between FD and PI highlights how conditions enabling refugee economic participation can mitigate security risks. These results emphasize the need for targeted, evidence-based policies that advance refugee economic inclusion as a pathway to enhancing political stability and sustaining long-term growth in host economies.