Business ownership is higher among immigrants,
but promoting self-employment is unlikely to improve outcomes for the less
Immigrants are widely perceived to be highly
entrepreneurial, contributing to economic growth and innovation, and
self-employment is often viewed as a means of enhancing labor market
integration and success among immigrants. Accordingly, many countries have
established special visas and entry requirements to attract immigrant
entrepreneurs. Research supports some of these stances, but expectations may
be too high. There is no strong evidence that self-employment is an
effective tool of upward economic mobility among low-skilled immigrants.
More broadly prioritizing high-skilled immigrants may prove to be more
successful than focusing on entrepreneurship.
Reliable estimates of taxpayer effects are
essential for complete economic analyses of the costs and benefits of
Taxpayer effects are a central part of the
total economic costs and benefits of immigration, but they have not received
much study. These effects are the additional or lower taxes paid by
native-born households due to the difference between tax revenues paid and
benefits received by immigrant households. The effects vary considerably by
immigrant attributes and level of government involvement, with costs usually
diminishing greatly over the long term as immigrants integrate fully into
This is a revision of the original article. Understanding how migration responds to tax
changes will aid in setting the progressivity of a tax system
This is a revision of the original article. Decreased transportation costs have led to the
transmission of ideas and values across national borders that has helped
reduce the barriers to international labor mobility. In this context,
high-skilled individuals are more likely to vote with their feet in response
to high income taxes. It is thus important to examine the magnitude of
tax-driven migration responses in developed countries as well as the
possible consequences of income tax competition between nation states. More
specifically, how does the potential threat of migration affect a country’s
optimal income tax policies?
Migrants can have positive political effects on their home
The number of immigrants from developing countries living
in richer, more developed countries has increased substantially during the last decades.
At the same time, the quality of institutions in developing countries has also improved.
The data thus suggest a close positive correlation between average emigration rates and
institutional quality. Recent empirical literature investigates whether international
migration can be an important factor for institutional development. Overall, the
findings indicate that emigration to institutionally developed countries induces a
positive effect on home-country institutions.
Immigration may boost foreign direct investment,
productivity, and housing investment
Migration policies need to consider how immigration
affects investment behavior and productivity, and how these effects vary with the type
of migration. College-educated immigrants may do more to stimulate foreign direct
investment and research and development than low-skilled immigrants, and productivity
effects would be expected to be highest for immigrants in scientific and engineering
fields. By raising the demand for housing, immigration also spurs residential
investment. However, residential investment is unlikely to expand enough to prevent
housing costs from rising, which has implications for income distribution in
Immigrants’ retirement decisions can greatly
affect health care and social protection costs
As migration rates increase across the world,
the choice of whether to retire in the host or home country is becoming a
key decision for up to 15% of the world’s population, and this proportion is
growing rapidly. Large waves of immigrants who re-settled in the second half
of the 20th century are now beginning to retire. Although immigrants’
location choice at retirement is an area that has barely been studied, this
decision has crucial implications for health care and social protection
expenditures, both in host and origin countries.
Can migrants help change the social norm?
More than 100 million women and girls in the
world have had their genitals cut for cultural, religious, or other
non-medical reasons. Even though international organizations condemn female
genital mutilation (FGM), or cutting, as a violation of human rights, and
most nations have banned it, it remains prevalent in many African countries,
and is slow to decline. This persistence raises questions about the
effectiveness of international and national laws prohibiting the practice as
well as the potential role of returning migrants in changing embedded
cultural norms. Does migration change migrants’ opinions and attitudes to
this custom? If so, do they transfer the new norms to their origin
Ethnic capital produced by local concentration of immigrants
generates greater economic activity
Immigrants can initially face significant difficulties
integrating into the economy of the host country, due to information gaps about the local
labor market, limited language proficiency, and unfamiliarity with the local culture.
Settlement in a region where economic and social networks based on familiar cultural or
language factors (“ethnic capital”) exist provides an effective strategy for economic
integration. As international migration into culturally diverse countries increases, ethnic
networks will be important considerations in managing immigration selection, language
proficiency requirements, and regional economic policies.
Emigration from developing countries can change local
labor market conditions and children’s work time
International labor mobility has resulted in sweeping
socio-economic changes in many developing countries. When a family member migrates for
work and sends back remittances, household income may rise, and with it investment in
children’s schooling. Emigration flows may also alter local labor market conditions and
wage rates, which can in turn affect children’s labor supply. Whether there is more or
less child labor as a result of migration may depend on the skill composition of the
migrants and on how family members respond to wage changes.