The Economic Case for Accepting Refugees

Narrator: Since civil war broke out in Syria in 2011, some 11 million Syrians have fled their homes due to the conflict. Nearly 5million have sought refuge in neighboring countries, while 1 million have sought asylum in Europe. 

European countries have been scrambling to determine how to handle the influx of refugees. Many Europeans are terrified about the effect these immigrants could have on their countries’ economies and cultures. Some think the borders should simply be closed. 

But research paints a different picture. Konrad Burchardi of Stockholm University, Thomas Chaney of the Toulouse School of Economics, and Tarek Hassan of Chicago Booth find that refugees may actually be the secret to securing long-term economic growth.

Tarek Hassan: So when you think about the Syrian migration crisis today, yeah so, people don’t want Syrians because they’re poor and what are they gonna add to the economy? Well, the US has a history of taking in migrants from really poor places that later took off.

Old Film Narrator: We in America are immigrants, or the children of immigrants.

Tarek Hassan: And once that happens, the descendants of the migrants from these places are really valuable for the local economy. So think of Ireland, for example. The Irish, when they arrived, were dirt poor. Nobody wanted them, while today Ireland is a pretty rich country, and it’s growing at a pretty high rate. The places that are taking advantage of the economic opportunities that exist in Ireland today are the places that took in those poor migrants back in the late 19th century. So this is an effect that transmits itself over generations. So you can think of this as a very long-term investment. It takes 30 years to pay off. You take in migrants today, these migrants later are going to connect you to a potentially flourishing economy.

Narrator: Historical immigration patterns in the US indicate which countries are likely to be the sources of foreign investment and the extent of that investment.

Old Film Narrator: The earliest waves brought people from Ireland, from Germany and nearby countries. Later the Scandinavians joined the migrations from the north and west of Europe.

Tarek Hassan: If you were a migrant arriving in New York or somewhere in 1880, the only place you could really go is the East Coast.

Old Film Narrator: The Irish were largely concentrated in the Northeast. By the year 1900, settlements of Germans were scattered widely from east to west. Scandinavians were grouped in the northern middle West.

Tarek Hassan: So migrations going back to 1880 predict the ancestry composition that exists today and also for that reason, predict where foreign firms invest when they invest in the US.

Narrator: By contrast, US regions that have not received large numbers of immigrants have forgone foreign investment.

Tarek Hassan: Up until 1965, Chinese migrants were not allowed to come to the US. So this period of Chinese exclusion had a fundamental impact on which parts of the US received migration from China, and which parts of the US today receive investments and interact economically with China. Places like Massachusetts in the Northeast, places that didn’t receive a lot of migration during the period of exclusion, have much fewer links with China today than they would otherwise have. The number of counties that have any investment relationship with China would be 63 percent higher if it hadn’t been for this period of Chinese exclusion.

Narrator: The research suggests that the most impactful migrations to the US are from countries that are far away and culturally very different, such as India.

Tarek Hassan: So think, for example, about Silicon Valley. A lot of what Silicon Valley does relies on the fact that they have a huge back office in India, of all places. So there’s a number of sociological studies that suggest that the reason why the back office of Silicon Valley is in Hyderabad and Bangalore is simply that Silicon Valley was full of migrants from Hyderabad and Bangalore. They originally went there in the ’70s and ’80s to be engineers. Yeah, so to have sort of like really kind of technical jobs. Then, when India opened up to foreign direct investment in the 1990s, they started becoming entrepreneurs, and started managing the economic links between Silicon Valley and India. And the suggestion of that research is that part of the reason of why Silicon Valley became such a powerhouse is because this link existed.

Narrator: The key message, says Hassan, is that immigration is as important to attracting foreign investment as any economic policy.

Tarek Hassan: So typically when we think about foreign direct investment, we think about factors like how expensive are wages. We think about: How educated is the population? We think about: Is there some natural resource nearby that you might need for production? We think about distance to the market. We think about how big is the market, things like that. Yeah, so these factors are often huge political issues when politicians are trying to attract foreign direct investment or say that they’re giving tax breaks in order to attract firms to invest in this location. So taken together, these economic fundamentals explain two-thirds of the systematic variation. 

Common ancestry explains the remaining third of the systematic variation. So you could think of common ancestry or migration, long-term effects of migration, being as important as half of these economic fundamentals taken together.

Narrator: America’s economic strength is the result of hundreds of years of immigration. Its ethnically diverse residents are a link between the local economy and the global economy. Governments should consider that when deciding what to do with the migrants at their gates. (children shouting)