Forced migration and local economic development: Evidence from postwar Hungary

We investigate the effects of forced migration on sending economies using the post-WW2 expulsion of German minorities from Hungary as a natural experiment. We combine historical and contemporary data sources to show that the forced migrations led to lasting reductions in economic activity. Plausible mechanisms driving this result appear to be sectoral change (shift towards agriculture) and skills differences between Germans and the settlers that replaced them. Our analysis reveals that forced migration can cause lasting regional inequalities in sending economies. • Forced migration leads to a lasting negative effect on economic activity in origin economies. • Affected areas increasingly specialise in agricultural activities for decades after. • Organised resettlement also appears to be driving negative effects.