RESEARCH
  • CSR

The Economic Upside of Immigration

Migrant communities attract investment and help us do business in the world



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Oh let us not be condemned for what we are.

It is enough to account for what we do.

                             James Fenton, 'Children in Exile', 1982 

In the corporate world Fenton’s message does seem to be hitting home. Companies are hiring, promoting, and including people based less on who they are and more on the merit of what they do. However, when for diversity we read immigration the overriding political rhetoric is about its negative impact on our economies.

But it now turns out that, like diversity, immigration is also good for the economy. New research, from the University of Chicago Booth School of Business, finds that receiving migration from a foreign country has a positive long-term effect on the ability of business to attract investment and interact economically with the migrants’ country of origin, bringing economic benefits in the communities where newcomers settle.

Having social ties and contacts with a foreign population in one’s own country makes it easier to do business in that group’s country of origin. For example, having a population from China or India, that has connections and understands how to get things done, makes conducting business with those countries easier.

“It’s clear from our study that ethnic diversity enhances your ability to both attract investment and do business in the world,” said Tarek Hassan, an economics professor at Chicago Booth and co-author on the study. 

This new research suggests that the anti-immigration rhetoric accompanying the EU referendum in the U.K. and heard on the campaign trail from Donald Trump lacks balance because it is too focused on the short term.

“This effect on foreign direct investment operates over long periods of time, spanning generations rather than decades, and the majority of the effect of ancestry on FDI comes from second and third generation immigrants, rather than the immigrants themselves,” Hassan says. “In fact, even the earliest migrations for which we have data going back to 1880 still significantly affect FDI today.”

The study also finds that the effects of FDI are stronger if the country is farther away, meaning that the presence of small groups of people from faraway places can have an outsize economic impact.

“It basically means that being open to a diverse set of migrants and taking in refugees has economic benefits decades down the line,” Hassan says.

The corporate world is now committed to creating cultures of inclusion, according to a recent survey of 800 U.S. business leaders, with more than 95% agreeing that “diversity is important to improving our bottom line profits,” and nearly 95% agreeing that “a culture of inclusion is critical to the future success of my organization.” This indicates a growing understanding that diversity is a critical competitive success factor in business.

The Chicago Booth study widens this understanding by revealing the link between immigration and economic growth and showing the value that diverse ethnic groups can provide to the economy.

Read the full research paper: ‘Migrants, Ancestors, and Foreign Investments’; Tarek A. Hassan, University of Chicago Booth School of Business; Konrad Burchardi, Institute for International Economic Studies, Stockholm; Thomas Chaney, Toulouse School of Economics.


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