Home > Uncategorized > How Immigrant Networks Help Economies

How Immigrant Networks Help Economies

It’s not just the simplistic “they bring cheap labor” (in the case of rich countries) or “they bring needed skills” (in the case of poor countries).

The fact is that immigrant communities solve information asymmetries and make economies work better by facilitating trade and information flows.

…a Chinese trader in Indonesia who spots a gap in the market for cheap umbrellas will alert his cousin in Shenzhen who knows someone who runs an umbrella factory. Kinship ties foster trust, so they can seal the deal and get the umbrellas to Jakarta before the rainy season ends. Trust matters, especially in emerging markets where the rule of law is weak. So does a knowledge of the local culture. That is why so much foreign direct investment in China still passes through the Chinese diaspora….

Diasporas also help spread ideas.

Nations can improve their economies’ efficiency simply by making it easier for immigrant communities to form within their borders. Cities and regions could compete with each other to attract them, too.

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