By Bedassa Tadesse and Roger White
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 at the University of Minnesota Duluth. Roger White is Professor of Economics at Whittier College.
The Conversation arose out of deep-seated concerns for the fading quality of our public discourse and recognition of the vital role that academic experts could play in the public arena. Information has always been essential to democracy. It’s a societal good, like clean water. But many now find it difficult to put their trust in the media and experts who have spent years researching a topic. Instead, they listen to those who have the loudest voices. Those uninformed views are amplified by social media networks that reward those who spark outrage instead of insight or thoughtful discussion. The Conversation seeks to be part of the solution to this problem, to raise up the voices of true experts and to make their knowledge available to everyone. The Conversation publishes nightly at 9 p.m. on FlaglerLive.
Steve says
Tell that to laken rileys family and 1000s others. Nobody is arguing about immigrants coming in the right way. This is a disgrace what’s happening to this country. If you don’t see it then your part of the problem
Sherry says
@steve. . . please do your research. trump told Republicans in Congress to STOP the legislation that would have helped to mend our completely broken immigration system. The current system is so very convoluted that even my immigration attorney friends can’t figure it out. Unless and until Congress gets their act together to fix the current system, it’s going to remain almost impossible for people to immigrate “legally”. I believe that is exactly the way Republicans want it. Regardless, trump and his cohorts in Congress sure as hell won’t make it any easier for folks to immigrate “legally” . They need immigration fear and hate to feed their racist base.
Steve says
Maybe do your research. That so called bill still allowed 5000 immigrants per day to enter the country . That’s all it is was a talking point for liberals to blame more bs on trump. I suggest you watch other news media other then cnn, msnbc, or ABC. They have lied to the American public since 2016. If you do your research you will find all the debunked bs
FlaglerLive says
“No, the Senate immigration bill does not allow 5,000 people to illegally enter the US daily.” If you’re going to lecture fellow-commenters about doing their research, try doing so yourself before using this site to spread disinformation.
Sherry says
Thank you Flaglerlive! Unfortunately, the maga brainwashed as some say “don’t give a shit” about credible facts.
Jake From State Farm says
All our welcome to come and live here. Just get in line and do it legally just as my family did.
Sherry says
@jake. . . Ellis Island has long since been decommissioned. Please see my response to steve. You, jake, need to do your research also! And I mean beyond what Fox tells you to think.
Ray W, says
Today, The Street reports that the president of the Atlanta branch of the Federal Reserve Bank recently said:
“I am totally comfortable with skipping a meeting if the data suggests that is appropriate.”
So why would one of the voting members on lending rate increases or decreases say that the voting body might not even need to meet or to vote on whether to change lending rates, i.e., leave them at the 4.75 – 5% rates?
Yesterday, CPI data came in at a 12-month average of 2.4% instead of the anticipated 2.3%. The goal is a CPI rise of 2.0% over a rolling 12-month average. Monthly CPI data is useful, but less reliable than longer-term collected data, due to the perceived volatility of short-term data.
Last week, September’s BLS jobs added number was expected to be 150k, due to a cooling economy. The numbers came in at 254k jobs added. And the July and August jobs added numbers were revised upwards, as well. It seems the jobs added values continue to be stubbornly stronger than expected.
There was a perceived need to cut lending rates by 0.5%. The data coming in after the rate cut supports the argument that instead of cooling, our economy remains unexpectedly strong.
Make of this what you will. Me? Since the first of the $2 trillion in unfunded stimulus money approved by former President Trump began surging into a rapidly cooling pandemic upheaval-induced recession, economists have been predicting inflation followed by increased lending rates followed by another recession (the “hard-landing”). Nearly every economist said as much.
The next $900 billion unfunded stimulus bill signed into law by former President Trump bolstered the idea that a second pandemic era recession was coming.
Inflation took root and then flowered. The Fed raised lending rates 11 times in 12 months. The goal was to cool an overheated economy. The “hard-landing” was less feared by Fed leaders than was the fear of runaway stagflation of the type that occurred between 1968 and 1983.
Then something unexpected happened. The economy kept growing despite the high lending rates. The job market remained robust, despite repeated rises in lending rates, rises that ended in 2022. It has been two years with no sign of recession. Economist after economist distanced themselves from their original recession predictions.
Now, some 15% predict a possible recession, with the majority accepting the idea that a “soft-landing” of a type theorized but never before realized is possible.
A scattered few predict that our economy will never fully land, meaning that if they are right, we may not soon return to an economy with a 2% inflation rate.
The question, today, seems to be how this has happened. It shouldn’t have happened this way, but it did. Why did it take so long for the high lending rates to cool the economy?
The article to which my comment is attached supports what I have been arguing for months and months. We need every immigrant we can get. Immigrants do not detract, in sum, from our national economy. They add to our national economy. An unprecedented rise in immigration has occurred alongside an unprecedented and unexpected rise in economic growth.
Perhaps, in microcosm, the jobs data for Springfield, Ohio, might offer a snapshot into the situation.
No one can dispute that Haitian immigrants poured into Springfield after word got out that more workers were needed to grow the local economy. It is estimated that in the last three years, some 10-12 thousand Haitian immigrants (mostly legal, by the way) poured into the area in and around Springfield.
So, I looked up unemployment data for Springfield.
In August 2024 there were 2806 unemployed persons in Springfield, with an unemployment rate of 4.4%. The Census shows a total population of 57,910.
Here are historical figures drawn from the Bureau of Labor Statistics database:
January 2017: 3856 (6.1%)
January 2018: 3054 (4.9%)
January 2019: 3250 (5.2%)
January 2020: 3617 (5.7%)
January 2021: 4104 (6.7%)
January 2022: 3322 (5.3%)
January 2023: 2743 (4.4%)
January 2024: 2680 (4.3%)
I freely admit that I am no economics scholar. At best, I am a curious student. But the data suggests that the influx of Haitian immigrants has not displaced many Springfield natives. Instead, new jobs have been created to absorb the influx.
Again, something unexpected seems to be happening all over the country. We keep adding more jobs, yet the unemployment rate remains at or around the ideal “full employment” 4% rate. Native born Baby Boomers are retiring out of the total jobs marketplace and the birth rate of American women has been below replacement rate, yet the figure for the total jobs marketplace keeps rising.
GDP figures keep growing, which suggests we are producing more and more as an overall economy.
People keep spending more and more money, which suggests that a growing population is spending most of what it earns.
Everywhere economists look, they see only healthy economic growth. Posted unfilled jobs openings have dropped back into a healthy range of roughly 1.0-1.2 unfilled jobs for every unemployed person.
Is it possible that the recent massive influx of immigrants has been the unexpected factor behind all this growth? I argue yes, but I might be wrong. The authors of this article seem to bolster my argument, but more study might be needed.
But if I am correct, then the leadership of one of our political parties just might have it backwards. Immigrants are not vermin; they do not have bad genes; they are manna from heaven to a starved American jobs marketplace.
Ray W, says
The Wall Street Journal reports that Jeremy Barnum, Chief Financial Officer of the nation’s largest bank, JPMorgan Chase, says we have achieved the “much-discussed soft landing with lower inflation and healthy growth.” Barnum stated in a conference call that with consumers continuing to spend and with big businesses confident in our economic future, “that’s pretty consistent with this kind of Goldilocks economic situation.”
Make of this what you will. Me? We are economically better off than we were four years ago.
Ray W, says
This just in.
CNN reports that today’s BLS-generated PPI (Producer Price Index) report, “which measures average price changes seen by producers and manufacturers, came in at 1.8% for the year that ended in September, a slight downshift from the 1.9% gain in August.”
To me, this means a couple of things.
First, the PPI does not assess prices consumers pay for goods; it addresses prices paid by producers and manufacturers for the finished products and materials they purchase in order to manufacture their own products. Businesses may not pass on any expected savings to their customers.
Second, the PPI is as volatile as other assessment tools on which economists rely. For example, an economist told CNN that the twin hurricanes interrupted supply chains and transport networks and the data hasn’t come in yet. He expects temporary “distortions” in the prices companies pay for goods or finished products. “We would likely expect to see inflation firm at best or slightly — really slightly — reaccelerate until those temporary bottlenecks can be undone.” I have read of other economists predicting slight impacts on regional GDP growth because of all of the FEMA money being injected into the south; people will immediately spend most of that money to start the rebuilding process.
Because the PPI measures many different categories of goods and finished products, “[f]or the month, prices held flat, as falling energy prices countered a 1% leap in foods — their highest jump since February — and resulted in overall goods deflation.”
E*Trade’s managing director of trading and investing, Chris Larkin, commented:
“‘Today’s PPI was a bit of a mixed bag; but overall, it should help ease any immediate concerns about reheating inflation from yesterday’s [Consumer Price Index],’ which showed inflation rising above expectations.”
Make of this what you will. Me? The longer-term data reflected in the PPI reports looks better than does the short-term data, but none of it looks bad. Something can be less good than expected and still be good, nonetheless. When 2% inflation is considered the Fed’s desired inflation rate, a 1.8% PPI rate over 12 months cannot be considered bad, even if the anticipated rate was 1.7%.
Sue says
I belive most people don’t have a problem with LEGAL immigration done the right way as always. Do have a problem with the last 4 years!!!
Ray W, says
Hello Sue.
One of these days you are going to come to the understanding that only Congress controls the hiring of customs officers and hearing officials, as Congress holds the purse strings.
We have a multi-year backlog of unheard cases involving those who legally entered the country, because Congress will not authorize the hiring of more hearing magistrates to reduce the backlog. The goal should be to have each asylum claim heard within a certain number of months.
Asylum laws arose out of the carnage of WWII. Every member nation to the U.N. is required to have asylum laws, because of what the Nazis did to the European Jewish population. The famous ship carrying Jews across the ocean looking for a place to dock prior to the outbreak of war was one of the prime motivating events for the legal requirement. The U.S. denied entry, as did the U.K., and many other countries. The ship returned to Europe and almost all of the passengers were murdered by the Nazis. Under these laws, anyone claiming asylum has a right to a hearing on the claim before being deported.
Again, with too few hearing officers, the wait for a hearing is multiple years. If after a full and complete hearing the asylum claim is denied, send them home.
You should have a problem with the last 30 years, not just the last four years. 1996 is the last time Congress made major changes to immigration laws. Waiting 30 years to address problems that have come up in the interim is foolish. Earlier this year, the House shut down a bipartisan Senate bill that would have addressed a few of the major problems. I assume by your comment that you have great difficulties with House leadership.
Bethechange says
Making of your response what I will, the last paragraph is perfect. Not sure if the commenter actually made it that far, but A, for effort!
JimboXYZ says
Narcissism & greed drive innovation for technology. Show me one technological innovation that someone wasn’t trying to make a name for themselves or looking to profit from. Sometimes an immigrant comes up with the innovation, often times it’s a bunch of executives looking for the next innovation for profit and fame. It’s comical that the iPhone was one product used. And how long did it take them to forget that Steve Jobs gets credit for the iPhone. Before the candy bar iPhone, everyone had to have the Motorola Razor flip phones. At a certain point HTC & others were making better phones than Apple’s iPhone, or rather there were innovations that were part of the process that were better than Apple’s. EV’s ? Musk’s Tesla is another hailed innovation, the Chinese have closed the gap on that too. Just a matter of time before the randomness of another making a breakthrough makes that game changer. It has little to do with immigration, more to do with money invested, effort invested & demands on labor to perform. At this point the quantum leaps of innovation are smaller increments of building on existing innovation for perception of pioneering innovation.
https://www.yahoo.com/news/apple-steals-away-htc-engineers-help-churn-more-131003626.html?guccounter=1
https://www.slashgear.com/apple-said-poaching-htc-engineers-for-china-tech-push-03319132/
https://www.cnet.com/tech/mobile/htc-engineers-officially-join-the-googleplex/