Mass Refugee Inflow and Human Capital Investments: Evidence from Greek Refugees in Greece

Abstract: This paper investigates the long-term impact of mass refugee inflow on human capital development of host regions. After the Greco-Turkish war of 1919-1922, more than a million Greek refugees arrived in Greece —€” a country with less than five million inhabitants at the time. We build a novel data set that combines detailed historical census data in 1928 with education data from the 1971 and 1981 censuses. Exploiting variation across localities and across cohorts, difference-in-differences estimates suggest a positive effect of the inflow of refugees on human capital formation of the native population. Relative to unexposed cohorts, exposed cohorts that were young enough to have been in school during or after the arrival of refugees, are more likely to be literate and to complete primary school in provinces that hosted a greater number of refugees. This increase in schooling coincides with childhood exposure to the population shock and is not driven by pre-existing trends. The construction of new schools between 1920—€”27 and the arrival of refugee teachers are important mechanisms through which the inflow of refugees increased schooling. Overall, our results suggest that early investment in education as a part of refugee settlement efforts can have a positive impact on regional development in the long-run.