The globe, immigration is a topic that sparks fierce debate. Opponents often portray immigrants as a burden on public resources or competition for local jobs, feeding into negative stereotypes that influence public perception and policy.
However, the reality of immigration’s impact on economies is far more complex and, in many cases, positive. While the critics focus on simplistic narratives, the economic role of immigrants, especially in driving innovation, enhancing productivity, and fostering economic growth.
Far from the burden that opponents claim, immigrants are pivotal in elevating both their adopted and origin countries’ standings in global value chains (GVCs). This contribution extends beyond the conventional focus on labor markets and taxes to reveal a sophisticated process through which immigrants foster economic resilience and growth by facilitating trade and the movement of value-added goods and services. As economists specializing in global trade and migration, our research shows that immigrants play a far more significant role in the economic development of their host countries than previously understood, particularly in what is known as “Trade in Value Added” (TiVA).
In today’s interconnected global economy, products are rarely made entirely in one country. Instead, different stages of production—whether design, assembly, or quality control—occur across multiple nations, allowing each country to contribute to a product’s final value. TiVA offers a way to measure each country’s contribution to these global production chains. It calculates the added value each nation embeds in the final product, offering a clearer understanding of how global trade operates.
For instance, while an iPhone may be assembled in China, its components come from a variety of countries, such as the U.S., Japan, and South Korea, each contributing to the phone’s overall value. This interconnected production process highlights the importance of global value chains, where countries specialize in different stages of production, ultimately enhancing trade sophistication. Our research reveals that immigrants play a vital role in this process.
Immigrants as Bridges in Global Value Chains
Our study found that a 10% increase in immigrants from a specific country residing in one of the 38 Organization for Economic Cooperation and Development (OECD) member states leads to a 2.08% increase in the value added from their home country embedded in their host country’s exports to the world. This impact is most significant in the services sector, followed by agriculture and manufacturing.
Consider the case of Indian software engineers working in Silicon Valley. These immigrants bring with them not only advanced technical skills but also an understanding of both the U.S. tech industry and India’s growing IT sector. This knowledge facilitates partnerships between Indian firms and American tech giants, enabling Indian companies to provide specialized coding and technology services. As a result, U.S. tech exports become more sophisticated, incorporating the expertise and added value of Indian labor. The end result is a product that is not only more competitive on the global market but also demonstrates how immigrants contribute directly to value creation.
Similarly, Chinese immigrants in Italy’s fashion industry act as vital intermediaries between the two nations. Their cultural knowledge helps Italian luxury brands tailor products for the lucrative Chinese market, while also connecting Italian designers with highly skilled Chinese textile workers. This results in a cross-national exchange of expertise that elevates both countries’ positions within the global fashion value chain.
These examples demonstrate the profound ways in which immigrants can act as bridges in global trade networks. By leveraging their unique skills, cultural knowledge, and connections, they strengthen economic ties between nations, enhancing trade sophistication in ways that pure market forces alone might not achieve.
Moving Countries Up the Economic Value Chain
A key aspect of economic development lies in moving up the value chain—that is, progressing from producing basic, low-value goods to more complex, higher-value products. This shift involves improving skills, adopting advanced technologies, and refining production techniques, enabling countries to capture greater economic value. Our research shows that immigrants play a crucial role in helping nations make this transition.
The ability to facilitate trade in value-added goods and services suggests that immigrants help nations move away from simply trading in raw materials or basic manufactured goods. Instead, they boost the exchange of sophisticated, high-value products and services, which are essential for long-term economic development. Countries that position themselves higher in global value chains tend to experience more robust economic growth, and immigrants are instrumental in helping nations achieve this goal.
Immigrants and Innovation
In addition to their role in trade, immigrants are also key drivers of innovation. They bring with them diverse skills and knowledge, which can fill labor shortages, spark creativity, and introduce new perspectives to industries. Research has consistently shown that diversity in the workforce fosters creativity and innovation, particularly in industries that rely on complex problem-solving, such as technology, engineering, and research.
For example, foreign-born workers have been integral to the rise of Silicon Valley as the global hub of technological innovation. Many of the leading firms in this sector, including Google and Microsoft, have foreign-born executives and employees who contribute to cutting-edge developments. These contributions extend beyond just technical skills. Immigrants often bring with them unique insights into their home markets, which can help companies in their host countries better navigate cultural and regulatory challenges in global trade.
This phenomenon is not confined to the tech industry. Immigrants contribute significantly to sectors as varied as pharmaceuticals, automotive manufacturing, and agriculture. In each case, their unique blend of skills and cultural knowledge helps to push industries forward, creating new market opportunities and enhancing productivity.
Enhancing Economic Resilience Through Global Trade Networks
Beyond their direct contributions to innovation and trade, immigrants enhance the economic resilience of their host and home countries by creating robust global trade networks. By acting as cultural ambassadors, they help to integrate their homeland into global value chains, fostering the exchange of knowledge, investment flows, and business connections.
For home countries, emigrants can serve as a bridge to new markets, showcasing products and services to global audiences. This not only helps local businesses expand but also supports the home country’s economic development. Immigrants also contribute to knowledge transfer, as the skills and expertise they acquire in their host countries are often passed on to firms and workers back home, further bolstering global value chains.
Policy Implications of Immigration and Trade
Our research has important implications for policymakers, particularly in an era of growing skepticism toward globalization and immigration. Restrictive immigration policies may have unintended consequences, hindering a country’s ability to compete in global value chains. Countries that want to become more competitive in the global economy should consider more open and inclusive immigration policies.
In addition to more open immigration policies, governments should adopt supportive policies that allow immigrants to fully utilize their skills and networks. Programs designed to facilitate economic integration, language training, credential recognition, and immigrant entrepreneurship can help maximize the positive impacts of immigration.
Moreover, policymakers should take a more holistic view of immigration’s economic effects, beyond the often-cited labor market and fiscal impacts. Immigrants not only provide additional workers and pay more taxes but also facilitate sophisticated international trade and value creation, contributing to the long-term economic health of their host countries.
As the global economy continues to evolve, with production processes becoming increasingly fragmented and interconnected, the role of immigrants as facilitators of trade and value creation is only set to grow. Rather than viewing immigrants as economic burdens, our research shows that they are valuable assets who contribute to the economic growth and resilience of both their host and home countries.
By facilitating sophisticated trade linkages and enabling countries to move up the global value chain, immigrants play a crucial role in global economic development. As debates around immigration continue, it is essential to move beyond simplistic narratives and recognize the complex ways in which immigrants contribute to prosperity in an interconnected world. In short, immigrants are not just crossing borders—they are weaving the fabric of global trade and economic growth, helping nations thrive in an increasingly competitive and complex global marketplace.
