In nearly every country that hosts foreign-born citizens, immigration emerges as a lightning rod for controversy. The economic realities of immigration, however, are far more complex than the negative sound bites suggest.
Far from being a burden, as critics claim, immigrants play pivotal roles in driving innovation, enhancing productivity and fostering economic growth in their adopted countries. They also elevate their adopted and origin countries’ standings in global value chains, contributing to economic resilience.
We are economists who study global trade and migration, and our recent work reveals that immigrants contribute far more to the economic fabric of nations than previously understood.
By facilitating what’s known as “trade in value added,” or TiVA, immigrants play a crucial role in helping countries specialize their production, move up the value chain and significantly enhance trade sophistication.
Moving up the value chain means progressing from producing basic, low-value goods to more complex, higher-value products. This shift involves improving skills, technology and production techniques, allowing a country to capture more economic value and develop advanced industries.
So, what exactly is trade in value added, and why is it important?
In today’s global economy, products are rarely made entirely in one country. Instead, different stages of production occur across multiple nations. TiVA measures each country’s contribution to a final product, providing clearer insight into global value chains. For instance, while an iPhone may be assembled in China, its components come from various countries, each adding value.
Measuring the effect on global value chains
Our study found that a 10% increase in immigrants from a particular country residing in one of the 38 Organization for Economic Cooperation and Development member states leads to a 2.08% increase in the value added from their home country that becomes embedded in their host country’s exports to the world.
This effect was strongest in the services sector, followed closely by agriculture and manufacturing.
To understand how this works, consider Indian software engineers in Silicon Valley. Their understanding of the U.S. tech industry and India’s IT sector can lead to partnerships. These partnerships lead to Indian firms providing specialized coding services for American tech giants. The result? Higher-value U.S. tech exports that incorporate Indian expertise. This perfectly illustrates how immigrants boost trade in value added.
Or take Chinese immigrants in Italy’s fashion industry. Their cultural knowledge might help Italian luxury brands tailor products for the Chinese market and connect Italian designers with highly skilled textile workers in China. The result? Italian fashion exports incorporate Chinese craftsmanship, elevating both countries’ global fashion value chain positions.
Our findings show that immigrants are pivotal bridges in global trade networks. They leverage their unique knowledge, skills and connections to strengthen economic bonds between nations. That’s in line with previous research showing the significant role immigrants play in fostering bilateral trade.
Why immigration matters in the global economy
In an era of increasing skepticism toward globalization and migration, understanding the positive economic impacts of immigration is crucial. Our current and previous research, and the findings from related studies, indicate that rather than “stealing jobs,” immigrants often create value and new economic opportunities that might not otherwise exist.
Immigrants bring diverse skills, knowledge and networks to their host countries that can enhance innovation, fill labor shortages and open new market opportunities. They often possess unique insights into their home country markets, helping host country firms navigate cultural nuances and business practices that might otherwise pose trade barriers.
For home countries, emigrants can serve as cultural ambassadors, creating awareness, showcasing products and services, and helping to integrate their homeland into global value chains. They may also contribute to knowledge transfer, investment flows and business connections that boost their home and host countries’ economic development.
Moreover, immigrants’ ability to enhance trade in value added suggests they play a role in moving countries up the economic value chain. Rather than simply facilitating trade in raw materials or essential manufactured goods, immigrants appear to boost trade in more sophisticated, higher-value products and services. This is crucial for economic development, as countries that position themselves higher in global value chains tend to see bigger benefits.
Rethinking immigration and trade policies
Our observations have important implications for both immigration and trade. For one, they suggest that restrictive immigration policies might have unintended consequences, hindering a country’s trade performance and position in global value chains. Countries that want to become more economically competitive might consider more open immigration policies.
What’s more, our research indicates that immigrants’ economic benefits extend beyond the often-cited labor-market and fiscal impacts – in other words, having more workers who pay more taxes.
The evidence suggests policymakers should take a more holistic view of immigration’s economic effects, considering its role in facilitating sophisticated international trade and value creation.
Our results also align with previous research highlighting the potential value of workforce diversity for businesses, particularly for firms engaged in international trade. Employees from diverse national backgrounds can bring valuable insights and connections that help their companies navigate global markets and value chains.
It’s worth noting that immigrants’ impact on trade in value added varies across countries and sectors. This suggests that rather than one-size-fits-all approaches, targeted policies might most effectively leverage immigration for economic benefit.
Maximizing immigration’s positive impacts on trade and value chains also requires supportive policies and institutions that allow immigrants to use their skills and networks fully. These might include programs to assist with economic integration, language training, credential recognition and support for immigrant entrepreneurship.
A new perspective on immigration
As the global economy continues to evolve, with value chains becoming ever more complex and interconnected, the role of immigrants as facilitators of trade and value creation is likely to grow even more significant. Countries that recognize and leverage this potential stand to gain a competitive edge in the global marketplace.
Our research paints a picture of immigrants not as economic burdens but as valuable assets who enhance their host and home countries’ positions in the global economy. By making sophisticated trade linkages possible, and by boosting participation in global value chains, immigrants contribute to economic growth and development in ways that go far beyond conventional understanding.
As debates around immigration continue, it’s crucial to move beyond simplistic narratives and recognize the complex and often subtle ways that immigrants contribute to prosperity. In an interconnected world, immigrants aren’t just crossing borders – they are helping to weave the fabric of global trade and value creation.
Bedassa Tadesse is Professor of Economics, University of Minnesota Duluth. Roger White is Professor of Economics, Whittier College.
The Conversation is an independent and nonprofit source of news, analysis and commentary from academic experts.
- External Link
- https://theconversation.com/immigrants-are-unsung-heroes-of-global-trade-and-value-creation-239171
17 Comments
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Banthu
Regular people don't care about "global trade", only billionaire elitists do.
Regular people care about having neighbors they can have a conversation with and also share a deep culture bond with.
In international sporting events, immigrants usually cheer for their country of birth instead of their adopted country when the two countries play each other.
Diversity isn't strength, it's weakness, it brings division, distrust and lack of cohesion in society.
dagon
The dialogue on immigration is backward IMHO.
Certain economic interests benefit immensely from legal and illegal immigration.
Many citizens do not benefit from that as it is a race to the bottom in the 'labor market'.
And then predatory political influences demonize immigrants , yet leave the economic interests bringing them in untouched in the debate.
The above article is the neo-liberal argument, like with Clinton and NAFTA and Merkel, and will not convince citizens when they cannot find work in late stage capitalism.
Moonraker
Yeah, as economists they are bound to concentrate on the economic (capitalist) interests and benefits but we have had a full 40 years of neo-liberal policies to those ends and, at best, the results are equivocal concerning whether we are better off overall, including socially, psychologically, politically, spiritually, environmentally and democratically. That means, despite the full-on propaganda during that time declaring that there is no alternative, it is unclear if people would vote it a success. It's been a massive experiment perpetrated on the world which would not get past an ethics committee in a university.
GBR48
@Moonraker. Those 'economic interests' pay for all of your public services. When the economy declines, they will too.
This is a good article, but 'simplistic narratives' seem to be in vogue.
Migrant labour is absolutely essential to all first world economies. It fills in all the gaps (the jobs local people cannot or will not do) and optimises the economy. Without it, your country will decline like Brexit Britain, with a debased currency, inflation, staff shortages and collapsing services - health, education, childcare, administration, retail, hospitality and trade. Cut off migrant labour and everything goes down hill surprisingly quickly.
Be prepared to pay the price if you block it. And once the economy declines far enough, governments will do what they always do to deflect attention from their failures, by starting a war.
zulander
Oh my this article is a major reach.
I guess some organisation out there is trying to create a positive buzz about "immigration" in this current climate.
They take two rather specific examples, then reach a general conclusion.
For places like the UK, immigrants assuming jobs such as uber, hospitality, vape shops, mobile phone stores - do not "free up" resources for higher levels on production.
Noone denies that some immigration, in certain sectors, is highly beneficial. The logical extension of that is not "therefore all immigration good, we need more"
zulander
Britain was already in rapid decline before Brexit.
There are shortages in healthcare especially - however this is also being exacerbated by so many new arrivals as well. There is a structural problem in the UK that needs to be addressed - untargeted immigration is not a cure and is worse than the disease.
jeffy
Yeah, watching as you become demographically and culturally replaced in your own homeland with the full support of the government does that.
Ah, well, as long as a few rich people get richer, the history and culture of the nation as a whole is irrelevant.
To paraphrase a well known religious figure, “What shall it profit a nation, if it shall gain the whole world, and lose its own soul?”
Money, money, money—the only thing of value to this writer.
bass4funk
If One side fails to listen to the drawbacks, then yes.
No one benefits from illegal immigration, certainly not the people who have to fund it.
More excuses?
Then they shouldn't come if they know they will be trafficked, raped, and sold, and often by the people within their original country of birth.
I don't think anyone is buying the argument of these liberal Marxists.
opheliajadefeldt
Immigration is benefiting most industrial nations at present, but there will come a time that it does not, and the numbers become overwhelming. Allowing untold numbers of immigrants into any country will have its limits. ....ps. I am not against immigration because it is beneficial to the countries they live in, but that will not continue to be the case.
Zaphod
opheliajadefeldt
Controlled immigration is not the same as uncontrolled mass migration of alien populations that go straight into the welfare system. It is a misleading word game to confuse the two.
wallace
"Illegal immigrants cannot claim benefits in the UK. A person is classed as an illegal immigrant when they do not have the right to remain in the country."
"Asylum support rates are currently set at £49.18 per person per week or £7 a day to cover essential living needs like food, travel, clothing and communications. They are set at £8.86 for those in full board accommodation. Which was reduced in January 2024 from £9.58."
JeffLee
We don't see this in the real world. Canada, for example, often has the highest immigration rate of developed countries, with population growth of 3.2 percent last year, yet its advanced high valued added industries have nearly all disappeared.
In the 90s, Canadian companies were the world's top makers internet equipment, train cars and systems, smartphones and the third biggest airline manufacturer. Those are all gone now. Name one famous Canadian brand. Ha, didn't think so.
By contrast, the tech manufacturing superstars are China, Japan and S. Korea, whose reliance on immigrants is extremely low, particularly long-term immigrants.
Moonraker
"Those 'economic interests' pay for all of your public services. When the economy declines, they will too."
Maybe. I am just pointing out, if you read it well, that 40+ years of neo-liberal policy primarily on behalf of the rich and the corporations has not been an unqualified success and that people might be reluctant to vote for it in retrospect. Are you saying it has been? Have the benefits been much greater than the costs? Don't we all pay the costs (as part of "growth") while those who create them largely get off scot-free? Isn't that the purpose?
jeffy
I have a question. If immigrants are supposedly the solution to population decline, then why is there such heavy investment into increasing automation and employee free businesses which evidently assumes that there will be fewer people? I mean, I understand that the vast majority of immigrants are college educated neurosurgeons and nuclear scientists, so their jobs are secure far into the future, but what about that tiny fraction of the immigration population that, I don't know, can only clean office buildings and work the register at convenient stores? Will those investing in automation and employee free businesses be sure to keep these unsung heroes in mind?
mikeylikesit
Most of my ancestors emigrated from Europe to America in the last 400 years. They certainly generated a lot of value via domestic production and global trade.
Of course, that 1/16 portion of my ancestors who are Native American might look differently on this “value.” They faced loss of land and near extermination at the hands of those value-creating immigrants
Great Bird
Yeah, the liberal Marxists! Even though it remains an undiscovered species, they sure are a big problem. Work a bit on your labels please.
albaleo
I think they are those that read Adam Smith on Mondays, Karl Marx on Tuesdays, and Superman for the rest of the week.