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Economics of International
Migration12
Jan Brzozowski, PhD
Cracow University of Economics
International Migration and FDIs
• Immigrant investment: the role of host
country policies
• Case study: Canadian immigration policy
Immigrant investment
• Usually immigrants come with low stock of
financial capital
• Still, it’s not about the quantity, but quality of
migration flow
• Selected, less numerous groups of immigrants
can be very beneficial to destination country
How to attract immigrant investment?
• Growth potential of destination economy
• Favorable entrepreneurship environment (rule
of law, good governance, stability, low
corruption etc.)
• Administrative incentives (fiscal instruments,
admission procedures, residence&citizenship
acquisition etc.)
Examples of favorable immigrant
investor policies
• Cyprus Citizenship by Investment: investment of
2.5 € million or more in real estate enables
national citizenship and passport. The property
can be sold after 3 years
• Swiss Immigrant Investor Program: residence
permit for invividuals who fund their company
and create jobs for Swiss citizens; alternativelly:
Lump Sum Taxation (min. 150 thousand CHF) for
permanent residents
US: EB-5 Immigrant Investor Visa
Program
• 10 thousand visas EB-5 issued anually
• Avaliable for individuals who invest 1 million $ or 500
thousand $ in Targeted Emplyment Areas (high
unemployment area or rural area)
• Investment must benefit the US economy: create at least
10 jobs or save jobs in „trubled businesses”
• After the investment criteria is met – conditional residence
permit for 2 years, then possibility to apply for permanent
green card
http://blog.lucidtext.com/category/eb-5-statistics/
EB-5 VISA STATISTICS (2006-2012)
www.iiusa.org
Case study: Canadian policy of
attracting immigrant investors
Basic facts
• 2006: population of 31.6 million, including 6.2 million foreign-born
• 2011: population of 33.5 million, including 6.8 million foreign-born
individuals
• Immigrants constitute 20.6% of the population (the highest
proportion among the G8 countries)
• Consistent immigration policy in last 30 years: each year ca. 200250 thousand new immigrants are admitted
• Economic and humanitarian immigration
300000
70
60
250000
50
200000
40
150000
30
100000
20
50000
10
0
0
Economic immigrants
All immigrants
economic immigrants as % of total immigration
Entry mode for economic migrants:
points system
• Main aim: to make sure that immigrant will contribute positivelly to
Canadian economy
• The evaluated elements are: educational attainment (up to 25
points); language facility in English and/or French (up to 24 points);
labour market experience (up to 21 points); age (up to 10 points);
personal adaptability (up to 10 points). Additional 10 points
awarded for employment already arranged in Canada.
• The passing grade was 67 points out of a possible 100 (for 2008).
• 1st Jan 2015: new Comprehensive Ranking System introduced (up
to 1200 points (core human capital factors, accompanying
partner/spouse factors, skill transferability factors and job
offer/arranged employment factors)
Within Economic Migrants – 3 cathegories of immigrant
entrepreneurs
• Self-Employed (1969) - small-scale entrepreneurs, expected to
establish a business immediately upon arrival. Conditions: business
experience and financial capital. The entry treshold was only
30/100.
• Entrepreneurs (1978) – middle-scale entrepreneurs, expected to
have a credible plan for estabilishing a business that will hire at
least 1 person,. Conditions: previous firm ownership, net wortk of
at least C$300,000 (€195,000). They needed only 35 points to
qualify for permanent residence.
• Investors - larger entrepreneurs, expected to invest a minimum
amount of approximately $400,000 (€260,000). The threshold was
also 35/100.
• Special emphasis put on manufacturing sector (considered as
underdeveloped in Canada). Still, migrants mostly are active in real
estate and commerce sectors.
90000
Please note: only principal applicants included (in the previous charts also the relatives in each catheogory have been included)
80000
70000
60000
50000
40000
30000
20000
10000
0
2004
2005
2006
2007
2008
Business Classes
2009
2010
Economic immigrants
2011
2012
2013
3500
3000
2500
2000
1500
1000
500
0
2004
2005
2006
2007
Entrepreneurs
2008
2009
Self-employed
2010
2011
Investors
2012
2013
But how it affected Canadian
economy?
• Initial outcomes very promissing
• Research on intentions of entrepreneur immigrants
arriving to Canada between 1992 and 1995: they
intended to create or maintain ca. 24,000 jobs
• investor immigrants between 1986 and 1996 – hoped
to add over $3 billion (€2 billion) of venture capital
• Enthusiasm of policy-makers: the programme seems to
be effective
But
• Nearly 2/3 of Business Class immigrants –
Eastern Asia (Taiwan, Hong Kong, mainland
China)
• Limited language skills + cultural differences
Evidence from Vancouver
(Wong and Ng 1998)
• Beneficiaries of the programme of Chineseorigin
• They work long hours and achieve low profit
rates. Many of their businesses are in
precarious circumstances
• They remain active in the ethnic enclave, few
go into the mainstream economy
Ley (2003): study among business
imigrants in British Columbia
• Failed expectations of immigrants, reluctance to
open a new business
• Complaints about Canadian economic
environment (high taxes, strong trade unions, too
many regulations)
• Transmission of business skills from one cultural
or economic and regulatory setting to another
can be problematic!
Hiebert (2008)
• comparison of Business Class immigrants with
other cathegories of immigrants
• Immigrants who arrived to Canada between 1985
and 2001 and filed a tax return in 2001
• Skilled workers had on average higher language
skills (87% claimed proficiency in English or
French, while in Business cathegory only 55%)
Employment earnings in 2001
Business immigrants
fare not very well on
(Canadian $)
labour market)…
Business immigrant
Refugee
Family immgirant
Skilled Worker
All immigrants
0
5000
10000
15000
Hiebert (2008)
20000
25000
30000
35000
40000
Total income in 2001
Business immigrant
Refugee
Family immgirant
Skilled Worker
All immigrants
0
5000
10000
15000
Hiebert (2008)
20000
25000
30000
35000
Conclusion
• Business immigrants have the lowest average income
among all immigrant cathegories
• This can be attributed to underreporting of income (tax
evasion), but still the gains for Canadian economy are
rather modest
• Conditions for Immigrant Investor Program have been
increased (investment of min. invest C$800,000)
• On June 19 2014 the federal Immigrant Investor Program
and Entrepreneur Program were terminated