Entrepreneurial Migration in an Integrated World

AuthorSpiros Bougheas,Rod Falvey
DOIhttp://doi.org/10.1111/sjoe.12249
Published date01 October 2018
Date01 October 2018
Scand. J. of Economics 120(4), 1171–1201, 2018
DOI: 10.1111/sjoe.12249
Entrepreneurial Migration in an Integrated
World*
Spiros Bougheas
University of Nottingham, Nottingham NG7 2RD, UK
spiros.bougheas@nottingham.ac.uk
Rod Falvey
Bond University, Robina QLD 4229, Australia
rfalvey@bond.edu.au
Abstract
A growing number of developed countries offer entrepreneurial visas as a means of attracting
entrepreneurial talent and capital. In this paper, weuse a simple two-sector model of international
trade with heterogeneous agents and financial frictions to show that entrepreneurial migration
can contribute to the international efficiency of production, even when capital also flows
internationally through borrowing and lending and foreign direct investment. In our model, all
cross-border transactions are motivated by cross-country variations in the quality of financial
institutions.
Keywords: Economic integration; entrepreneurial migration; financial frictions; institutions
JEL classification:F21; G15
I. Introduction
The economic contributions of migrant entrepreneurs are increasingly
being recognized, as evidenced by the recent attempts of many national
governments to attract them. Table 1 provides a sample of visa programmes
specifically targeting entrepreneurial migrants.1In addition, many European
*Anearlier version of the paper titled “The Impact of Financial Constraints and Wealth Inequality
on International TradeFlows, Capital Movements and Entrepreneurial Migration” was published
as a GEP WorkingPaper 14/04, University of Nottingham. Wewould like to thank Doug Nelson,
Haiping Zhang, three anonymous referees, and participants at the 2009 First International
Workshop on “Contemporary Economic Theory: Topics on Development Economics” at the
University of Guadalajara, the Second GEP Conference in China, University of Nottingham
– Ningbo 2009, and the 2015 Australasian Trade Workshop in Sydney, for helpful comments
and suggestions. S. Bougheas would like to acknowledge financial support from European
Cooperation in Science and Technology Action IS1104 (GECOMPLEX).
1This list does not exhaust the business/entrepreneurial visas available from these countries.
Australia, for example, also has: Investor,Significant Investor, Venture Capital Entrepreneur, and
Significant Business History visa streams.
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The editors of The Scandinavian Journal of Economics 2017.
1172 Entrepreneurial migration in an integrated world
countries, including France, Germany, Italy, the Netherlands, Spain,
Denmark, and Sweden, offer self-employed immigrant visas with conditions
and eligibility criteria that vary by country. Entrepreneurial migrants are
generally expected to play an active role in managing their enterprise, and
the requirements for permanent residency often include job creation. The
underlying motivation is that governments want to boost entrepreneurship
in general, because (successful) entrepreneurship is expected to create jobs
and to bring other economic benefits (innovation, for example; see Xu,
2015). The argument for specific entrepreneurial visas is that standard
work visas, which are otherwise used to attract skilled and talented
individuals, might exclude potential entrepreneurs. Work visas typically
involve education and skill qualifications, which might not be necessary
for successful entrepreneurship in some areas, and they often require
employer sponsorship, which constrains immigrants from starting their own
businesses until permanent residency has been achieved. In the meantime,
the business opportunity and/or the potential migrant might have gone
elsewhere (see Sumption, 2012).
Although the numbers entering on entrepreneurial migrant visas are not
large,2there is ample evidence suggesting that a significant number of
migrants establish their own firms. A recent report (OECD, 2010) notes that
in the majority of OECD countries the share of workers in self-employment
is higher among immigrants than among the native born. A more recent
study (Marchand and Siegel, 2014) finds that the corresponding shares
for members of the European Union are slightly higher for citizens (12.2
percent) than for non-citizens (10.5 percent). However, there is significant
variation in the likelihood of being self-employed across countries for
both types of residents. In the extremes, we have Greece, where 24.4
percent of citizens are self-employed in contrast to only 6.5 percent of
non-citizens, and the Czech Republic, where 27.8 percent of non-citizens
are self-employed in contrast to 15.1 percent of citizens.
Migration experts have observed that despite the growing trend of
entrepreneurial migration there is a lack of research on its potential effects
(see, e.g., Kerr, 2013; Marchand and Siegel, 2014). All countries mentioned
above are well integrated into the world economy. Goods, capital, and
firms are allowed to move relatively freely across their borders. If we view
entrepreneurial migration as providing a new channel for capital movements
in addition to international borrowing and lending and foreign direct
investment (FDI), the following question arises. What are the additional
2For example, in Table 1, the Australian scheme listed had 739 applications lodged and 342
granted in 2013–2014, and the UK Entrepreneur visa scheme granted 1,156 visas in 2013–2014.
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The editors of The Scandinavian Journal of Economics 2017.

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