employment rates, while outcomes for refugees remained mostly constant for several months after the initial shock and only improved in recent months. In terms of income, refugees experienced a large negative shock in May-June 2020 leading to a large income gap between refugees and urban nationals at the beginning of the pandemic. The gap narrows in 2 out of 5 survey rounds but widens again in April-June 2021. At no point do refugees earn significantly more than urban nationals. To the contrary, in most waves, refugees earn 19-61 percent less than urban nationals. Continuously low income levels coupled with a slow and often stagnant recovery in the labor-market (Figure 3) highlight the fragile job-market situation refugees face.

Despite controlling for demographic and location characteristics in our main specification, or for any of our alternative specifications (Figure 6 – Figure 8 in the appendix), we are unable to explain a large fraction of the observed difference in employment outcomes between urban nationals and refugees. Refugees fared worse than urban nationals before the COVID19 outbreak and even diverge from nationals in later rounds of the panel due to exhibiting a slower rate of recovery. Several factors can contribute to explaining this difference. Refugees do not have a universal legal right to work in Kenya; often lack the documentation needed to acquire formal permits (movement passes and work permits), access security nets or formal financing; face strict movement restrictions; and are subject to labor-market discrimination. Also the quality of education can play a role as we only observe formal educational attainment.

It is crucial for policy makers to keep in mind that refugees lived in very vulnerable circumstances even before the pandemic. Recently conducted socioeconomic studies show that about six in ten refugee households living in Kakuma and Kalobeyei did not have access to food in the right amounts and quality (World Bank, 2021; UNHCR & World Bank, 2020). With the closure of public spaces, business restrictions and closures of refugee camps to the outside world, most of the few remaining economic opportunities available to refugees disappeared, leaving most households without an income earning activity and thus fully aiddependent in the first months after the initial shock. Even after a recovery could be recorded for nationals with the lifting of restrictions in fall 2020, outcomes for refugee communities remained stagnant. We observe that regardless of educational attainment, skills (proxied by age), gender or location, once driven out of the labor market, refugees find it exceedingly hard to navigate a tight job market and build new livelihoods. This prolonged recovery translates into a prolonged period of high labor market insecurity and by extension a high risk of continued food insecurity, especially in times when funding shortages have tightened budgets of relief organizations and aid frequently cannot be delivered at full capacity (WFP, 2020).<sup>33</sup> During a shock such as COVID-19, existing vulnerabilities were therefore aggravated over an extended period.

It is therefore crucial for policy makers to build resilience among refugees and remedy existing frictions in the labor market. Refugees for example do not have the legal right to own land, work outside refugee camps or move and settle freely in Kenya. Current restrictions limit the viable economic opportunities refugees have legal access to and therefore their ability to find alternative income sources in times when a large fraction of jobs cannot be performed

> 33 Food assistance has been reduced to 60 percent of a full food ration in 2021 and the distribution cycle extended from monthly to bimonthly distributions. In October 2021 the ration size was further reduced to only 52 percent of a full ration.

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