In many countries where immigrants live, there is often a lot of discussion and controversy about immigration. Some people think that immigrants are a burden on the economy. However, the truth is more complicated than that. Immigrants actually play a very important role in driving innovation, increasing productivity, and helping the economy grow in the countries they move to. They also help to improve the global standings of both their new country and their home country by contributing to global value chains.
I am an economist who studies global trade and migration, and recent research has shown that immigrants have a much bigger impact on the economy than we previously thought. Immigrants help countries specialize in what they produce, move up the value chain, and improve their trade capabilities. This means that countries can start making more complex and valuable products, which helps them earn more money and develop advanced industries.
So, what exactly is trade in value added, and why does it matter? In today’s world, products are usually not made in just one country. Different parts of a product are made in different countries. Trade in value added measures how much each country contributes to the final product, giving us a better understanding of global value chains. For example, even though an iPhone is put together in China, its parts come from many different countries, each adding value to the final product.
Our research has shown that a 10% increase in immigrants from a particular country living 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 is included in their host country’s exports. This effect is most noticeable in the services sector, followed by agriculture and manufacturing.
To understand how this works, think about Indian software engineers working in Silicon Valley. They know a lot about the U.S. tech industry and India’s IT sector, which can lead to collaborations. These collaborations result in Indian companies providing specialized coding services for American tech companies. This leads to higher-value U.S. tech exports that incorporate Indian expertise. This shows how immigrants help boost trade in value added.
Our findings show that immigrants are like bridges that connect different countries in global trade networks. They use their unique knowledge, skills, and connections to strengthen economic ties between nations. Previous research has also shown that immigrants play a big role in promoting bilateral trade.
In today’s world, where many people are unsure about globalization and migration, it is important to understand the positive impact immigrants have on the economy. Immigrants bring diverse skills, knowledge, and networks to the countries they move to, which can help with innovation, labor shortages, and new market opportunities. They also have insights into their home country markets that can help companies in their new country navigate cultural differences and business practices.
Immigrants can also help their home countries by acting as cultural ambassadors, promoting products and services, and connecting their countries to global value chains. They can also help with knowledge transfer, investments, and business connections that benefit both their home and host countries’ economic development.
Our research suggests that immigrants play a key role in moving countries up the economic value chain. Instead of just facilitating trade in basic goods, immigrants help countries trade in more advanced and valuable products and services. This is important for economic growth because countries that position themselves higher in global value chains tend to see more benefits.
Our findings have important implications for immigration and trade policies. Restricting immigration could hurt a country’s trade performance and global value chain position. Countries that want to be more competitive economically should consider more open immigration policies. Policymakers should also look at immigration’s role in facilitating international trade and value creation, rather than just focusing on labor market impacts.
In conclusion, immigrants are not a burden on the economy but valuable assets that help countries grow and succeed in the global marketplace. By creating sophisticated trade connections and increasing participation in global value chains, immigrants contribute to economic development in ways that are often overlooked. In a world that is becoming more interconnected, immigrants play a crucial role in global trade and value creation.