The Pro-Growth Benefits of Investment Migration Programs

Many nations seek to boost their prosperity by offering residence and/or citizenship by investment programs to attract individuals who are economically successful. Such programs generally require applicants — some of whom are from less advanced nations — to make significant investments in their new country in exchange for residence rights and/or an accelerated route to citizenship.

Participating nations include large, prosperous countries, such as Australia, Canada, Switzerland, the UK, and the USA; smaller wealthy jurisdictions, such as Hong Kong, Jersey, Monaco, Singapore, and UAE; and nations that aim to improve their prosperity, such as Cyprus, Latvia, and St. Kitts and Nevis.

While these programs are based on producing win–win scenarios for both nations and investors, they do generate some controversy. Certain critics worry about whether there is adequate due diligence to make sure ill-intentioned people do not take advantage of the programs. Others assert it is somehow demeaning for a country to ‘sell’ residence rights or citizenship. And some fret that the price is not high enough, or that there are insufficient rules to ensure that investments produce promised benefits.

Macro-economic benefits

In theory, the benefits of migration are potentially enormous. This is partly because labor productivity is much higher in some jurisdictions than in others. This helps to explain why Indian, Lebanese, and Nigerian individuals (among others) who migrate to the USA, for instance, earn far more than those who remain in India, Lebanon, and Nigeria.

Looking at the issue from a global perspective, John Kennan of the University of Wisconsin estimated significant benefits from open migration:

There is a large body of evidence indicating that cross-country differences in income levels are associated with differences in productivity. If workers are much more productive in one country than in another, restrictions on immigration lead to large efficiency losses. …The estimated gains from removing immigration restrictions are huge. Using a simple static model of migration costs, the estimated net gains from open borders are about the same as the gains from a growth miracle that more than doubles the income level in less-developed countries.

American economist Lant Pritchett has similar estimates of great economic benefits:

the estimates of the gains from the fanciful counter-factual of a complete liberalization of labor mobility are that world GDP would roughly double. At current levels of GDP this implies gains of 65 trillion dollars.

Some argue that these large numbers are unrealistic because they do not measure whether large-scale migration would negatively impact on the policy environment in destination countries. In other words, gains from higher labor productivity may be overstated if mass migration causes anti-market policies. Economic migration programs are narrowly tailored, however, so neither the large estimates nor the theoretical objections are particularly relevant. The numbers quoted above are, nevertheless, primarily based on the potential benefits that materialize when low-skilled migrants move to nations that have higher levels of labor productivity than their countries of origin. In the case of investment migration programs, on the other hand, successful applicants are usually well educated, highly skilled, and possess more wealth, all of which means that they will probably increase their incomes, thus boosting global GDP while also increasing the per capita GDP of their new countries of residence.

National benefits

Governments undoubtedly expect to gain when they set up investment migration programs. In some cases, they receive direct payments to their treasuries. In other cases, they require investments in the private economy to bolster national income and create more economic opportunity.

Substantial evidence exists that nations reap considerable benefits from such programs. In July 2023, the trade association for the US EB-5 Immigrant Investor Program, Invest in the USA (IIUSA), estimated that it has generated in excess of USD 50 billion of investment, and supported more than 1.35 million US jobs.

The US EB-5 Immigrant Investor Program is just one example; the USA has a range of programs designed to attract economically successful people to the country, and its efforts are extremely effective, as reported in The Washington Post:

Countries are constantly competing for the most talented workers and, according to the best available immigration statistics, the USA has been winning. The USA is home to just 4.4 percent of the world’s population, but in 2010, it gained more skilled immigrants than all other countries combined. The United States is also home to the majority of immigrant inventors, based on global patent data. And the majority of immigrant Nobel laureates. …147 million potential immigrants worldwide identify the USA as their top destination — 3.8 times as many as choose the second most popular option, Germany. …Immigrants from an average developing country can expect their income to multiply by a factor of four or six after moving to the USA, the authors write. Likewise, the US labor market places a higher value on skills, which makes it a particularly attractive destination for the most qualified migrants.

Other nations, too, have reaped significant rewards. By early 2019, Cyprus had attracted approximately EUR 6.6 billion to the island since the program’s inception, and the Government of Malta collected more than EUR 200 million in the first two years after its program was launched by Henley & Partners in 2014. In 2016, EUR 163.5 million was derived from the Malta Individual Investor Programme, and Malta registered a EUR 112.9 million surplus. This is equivalent to 1.1% of GDP and a shift from the deficit of EUR 104.1 million recorded in 2015. According to the ‘Eighth Annual Report on the Individual Investor Programme and Granting of Citizenship for Exceptional Services of the Government of Malta’, between 2015 and 2021, the Malta Individual Investor Programme had attracted the equivalent of more than EUR 1.13 billion in contributions to the Community Malta Agency, including EUR 320 million in property purchases and rent, EUR 220.9 million in investments in government stocks, and EUR 5.9 million in donations.

To be sure, there are national losses. When relatively successful migrants relocate from Country A to Country B, this is not beneficial for Country A. Since economic migrants generally move from poorer nations to richer nations, there are critics who complain that the resulting ‘brain drains’ make wealthy nations more prosperous while compounding the economic challenges of less-developed countries. The counter-argument is that brain drains might not occur if the affected governments had better policies. People usually feel affection for their birth nations, and move only because they feel a need for greater security and more hope for their children.

Another criticism is that a growing number of economic migrants are going from one developed nation to another, generally for tax reasons. For example, Norwegians move to Switzerland to avoid punitive taxes on capital. “Non-doms” move from the UK to Monaco to avoid harsh new rules to tax worldwide income. And the French have traditionally viewed Belgium as a refuge because it has no capital gains tax.

Politicians in high-tax nations are resentful when the geese with the golden eggs fly away. But rather than fix their bad tax policies, they generally advocate for dirigiste policies such as exit taxes and global tax agreements designed to enable higher tax rates. Such initiatives, if they become widespread, could have a negative impact on traditional citizenship by investment programs.

Family benefits

For those who have more sympathy for people than for governments, maintaining freedom of emigration is important. One assumes that the individuals who move from one country to another believe that migration will be in their interest. A study by the World Bank provides rich evidence that economic migrants on average do enjoy significantly higher earnings in their new countries, noting that “Migrants — high and low skilled — experience huge income gains on migrating”. Indeed, according to the report “typical individuals from an average developing country should expect to earn four to six times their income upon moving to the United States”.

This is a reflection of higher labor productivity in advanced countries, which is why low-income and/ or low-skilled migrants benefit. For the subset of successful migrants who contribute capital as well as labor, their ability to redeploy their investments in more market-oriented nations enables greater accumulation of wealth, which is another mutually beneficial situation for themselves and for their new countries of residence.

This does not mean every migrant enjoys economic success. Some even return to their countries of birth. Having the freedom of choice by definition means, however, that they are making decisions that are in their own best interest.

Controversially beneficial 

Economic migration is a net plus for the world, a net plus for developed nations, and a net plus for highly skilled individuals and investors. There remains, however, some degree of controversy regarding this process. Development proponents are perturbed about so-called brain drains, and tax authorities are concerned about the loss of taxable income, but at present these concerns are outweighed by the perception that people should have the freedom to move — assuming, of course, that there are nations that are willing to accept them.

Daniel J. Mitchell is Chairman of the Center for Freedom and Prosperity, a pro-market public policy organization he founded in 2000. His major research interests include tax reform, international tax competition, the economic burden of government spending, and other fiscal policy issues. Having also worked at The Heritage Foundation and Cato Institute, he has decades of experience authoring papers, writing editorials, working with the public policy community, and presenting the free-market viewpoint to newspaper, television, and radio media. 

He has addressed a wide variety of groups in dozens of cities and more than 50 countries. He also served on the editorial board of the Cayman Financial Review and holds a PhD in economics from George Mason University.