Refugees, Trade, and FDI

For centuries, those fleeing persecution have spread ideas, diffused knowledge, and transferred technology across the globe. From Huguenots raising productivity in Prussian textiles to Vietnamese refugees fostering US-Vietnam trade, refugees constitute bridgeheads between countries and conduits between cultures. This review examines the trade and investment links forged by refugees between their countries of resettlement and their origins.

We document how refugee-links differ from broader immigrant effects. Refugees often represent new populations in host countries, are positively selected on human capital, and show high entrepreneurship rates—the most entrepreneurial of all migrants in Australia, and 6 percentage points more likely to be self-employed in the UK. A 10% increase in refugees from a particular origin is associated with a 2.95% increase in FDI and a 3.09% increase in exports to that origin country.

However, the political strife refugees fled may undermine functioning of home markets. We find strong complementarities between formal institutions and refugee networks: refugees exert no effect on trade or FDI if their origin countries suffer political instability or absence of rule of law. We conclude by discussing policies to engage refugee diasporas—including lowering remittance costs, providing labor market access, and origin country reforms like Vietnam's investment incentives for the overseas Vietnamese community.