Despite chronic labor shortages the world over, few administrations openly want higher levels of migration to help ease the shortage, with many preferring instead to bemoan so-called illegal migrants and blame them for their country’s woes. Research from Columbia Business School highlights how foolish that is and reminds us that providing pathways to legal residency can be hugely beneficial to the country.
The research shows that the use of immigration pardons increases entrepreneurial investment by immigrants in a region. The findings emerged after an analysis of a pardon issued to around 300,000 undocumented Venezuelan immigrants by the Colombian government in 2018. The researchers found that those people were nearly 2% more likely to subsequently start a business.
“There’s a clear economic incentive to expanding an individual’s legal rights,” they explain. “Access to resources such as banking, borrowing, and the court systems are critical to developing a business, but often require legal status to access. When immigrants are granted legal status and access to these resources, we see them start more firms.”
Strong foundations
The researchers paired up immigrants who were granted the pardon with the registry of new firm creation, called the Registro Unico Empresarial (RUES). By using the ID number of the individuals, they were then able to determine whether they were listed as a legal representative of a business.
“In principle, the pardon could have drawn the immigrants away from entrepreneurship by making it easier to find a normal job,” the authors explain. “Our study helps clarify the role of legal protections for immigrant entrepreneurship. By founding a new business, the migrants create investments that can potentially benefit the broader economy.”
The results show that the impact of receiving the pardon actually increased over time. This matters as the businesses created by the pardoned migrants actually created a number of jobs, which had a significant impact on the Colombian economy.
The impact was also greater among people who had more time to spend on the creation of their businesses. For instance, it was less likely that heads of households or older adults would create a business than younger people without family responsibilities.
As a result, the researchers believe that granting legal residency to migrants, beyond permitting their physical presence in a country, is essential for entrepreneurial investment amongst migrant populations.
