Unexpected Guests: The Impact of Internal Displacement Inflows on Rental Prices in Colombian Host Communities

We study the causal impact of large influx of internal displaced people (IDP) on rental prices in Colombian host cities during the period 1999-2014. Following a Bartik-type instrumental variable approach while leveraging on... [ view full abstract ]

We study the causal impact of large influx of internal displaced people (IDP) on rental prices in Colombian host cities during the period 1999-2014. Following a Bartik-type instrumental variable approach while leveraging on high quality and high frequency administrative panel data on IDP flows across

Colombian municipalities, we identified an economically large heterogeneous impact: as IDP inflows increase, rental prices increase (decrease) for low (high) income units. We provide empirical evidence on two potential underlying mechanisms for this finding. First, while construction of housing units of social interest is inelastic to IDP inflows, the supply of housing units of non-social interest increases with the arrival of IDPs.Additionally, using census data from 1993 and 2005 we identify and quantify large housing deficits driven by IDP shocks but only in highly urbanized municipalities. Second, we find that higher IDP inflows are associated with increasing crime which may arguably put a downward pressure on rental prices in high-income rentals.