Other anecdotal evidence from Iran also suggests that bad living conditions intensify negative attitude towards refugees. Nasr Esfahani (2020) reports that among Tehran citizens, the opinion that “do you agree to prohibit the residence of Afghan refugees in Tehran?” is responded “yes” much more often in poor districts of the city and among people who stated having problem in their livelihood.

**5.5. The effect on inter-community and intra-community inequalities** As the last empirical exercise, we carry on examining how economic shocks affect inter-community and intra-community inequalities. For doing this, we measure inequality in total expenditure per capita using the Theil index, which allows us to decompose inequality into the parts due to inequality within communities and between communities. Specifically, the Theil index can be written as

where μ is average expenditure for the total population, and s� and x̅�, respectively, show expenditure share and average expenditure for Afghan and Iran nationality groups.

Using HEIS data, we compute the monthly Theil index and its between and within components. Panel A of Table 9 shows the summary statistics of the measures. As expected, the numbers suggest higher inequality among Iranians (9.85E-4) compared to Afghan refugees (4.95E-4). Moreover, since Afghan refugees comprise a small share of the sample, the between-component of the Theil index is much smaller than the within-component. For this reason, we also use the ratio of between to within components as a dependent variable in the regressions.

After computing monthly inequality measures, we estimate the following regression for between and within components and their ratio Panel B of Table 9 shows the estimation results using both measures of shocks which are year-on-year difference of exchange rate and its cyclical component. We find that both between and within components of inequality are positively associated with the economic shock variables. In addition, columns (5) and (6) suggest that bad economic conditions increase the between-component of inequality more than the withincomponent. Therefore, in regard to Afghan refugees in Iran, while economic shocks increase both intercommunity and intra-community inequalities, they have a stronger effect on inter-community inequality.

# **6. Policy and program implications**

This paper investigates the unequal effect of economic shocks in the host country between refugees and host communities. The macroeconomic fluctuations in Iran in the 2010s provide us an excellent testing ground for this topic. Using different rounds of household surveys, we draw an analogy between Afghan refugees and Iranians in terms of the labor market outcomes, income, and consumption expenditure. The numbers show that while Afghan refugees have lower unemployment and layoff rates, they work in lowstatus and unskilled jobs. They participate more in the labor market, work longer hours, and are more productive (get higher hourly wages) than similar Iranians. Their earned income is higher on average, but they have lower unearned income and total income than Iranians. The average per capita expenditure of Afghan households is less than Iranians, even though per capita food expenditure is closer between the two communities.

Regarding the unequal impact of economic shocks, our results imply that Afghan refugees exit the country more often during bad economic times in Iran. Comparing Afghan refugees who stay with all Iranians while controlling for observable characteristics suggests that economic shock disproportionately reduces Afghans’ wages while raising their working hours. As a result, the net effect of shocks on their 13