Giving refugees money instead of goods can lead to price gouging, but it doesn't have to
from humanitarian agencies and organizations, instead of food, clothing and other items shipped from afar. This approach is intended to let refugees get more of what they need while also boosting local businesses.
But because local retailers sometimes respond to higher demand brought about by an influx of money by , the emphasis on cash assistance can hurt both local residents and refugees—especially those who live in camps.
And yet we've determined that it's possible for humanitarian organizations to give refugees cash without stoking inflation nearby.
Calibrating prices
This would be possible through a new system we are calling "." We propose that humanitarian organizations increase cash assistance to reward local retailers when they reduce prices. We also support decreasing or terminating that aid to punish retailers who take advantage of the situation by raising prices.
Because local governments like to see more cash being brought into the local economies, we are suggesting that local governments monitor the prices of basic necessities and report what they see to humanitarian agencies and organizations.
interviewed humanitarian organizations, retailers, suppliers and local authorities and collected data at refugee camps in Greece. Based on our extensive analysis of that information, to decide on the right mix of money and goods to distribute to refugees.
This new mechanism would put more money in refugees' hands as long as retailers keep their prices low. Instead of having a motive to raise their prices and profit from the cash assistance refugees get, local retailers would have an incentive to reduce their prices.
As a result, refugees could enjoy lower prices and the flexibility to use aid money as they see fit without disrupting the local economy. We believe that refugees, retailers and local residents would all be better off this way.
More refugees and more cash
This problem is important to resolve because there are more than forcibly displaced worldwide, according to estimates made in 2021 before Russia invaded Ukraine, which sent another . About 27 million of the 80 million displaced were refugees, including large numbers from Syria, Venezuela, Afghanistan, South Sudan and Myanmar.
And about , according to United Nations estimates.
Humanitarian organizations such as and used to provide refugees with only food, clothing and other items known as in-kind assistance. As of 2014, those goods accounted for 94% of the humanitarian assistance worldwide, with .
.These groups, as well as government-run international agencies like the .
The approach we propose provides more flexibility and can, through purchasing power, help restore refugees' dignity.
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