Financial aid, remittances and their effect on relative deprivation in Rwanda

Abstract

Economic relative deprivation is increasingly recognized as an indication of economic well-being, also among refugees. This study examines to what extent financial contributions (financial aid and remittances) can compensate for the objective and subjective relative deprivation of Congolese refugees compared to their Rwandan hosts. The analysis is conducted using unique data that have been collected with a UNHCR-funded research project. We find that refugee households initially experience more objective and subjective relative deprivation than local households, but that this association is largely suppressed by financial contributions they receive. The results show that especially financial aid can compensate for relative deprivation. Furthermore, there is evidence that local households are more often exceptionally deprived than refugee households, when more rigid measurements of objective relative deprivation are used. To promote economic well-being among the whole population, the needs of both refugees and locals should be considered when distributing financial and development assistance.