What kind of citizenship law best promotes economic development?

The IMF has recently analysed the impact of citizenship laws on economic development. The Future Citizen Institute has paid attention to this monetary aspect of citizenship, for example in the context of remittances and the economic benefits of acquiring citizenship by naturalisation. The IMF paper, however, has looked at how the laws of 105 developing countries regulate citizenship at birth through ius soli, ius sanguinis and mixed regimes with the aim of investigating empirically how citizenship laws impact economic development. The IMF comes to a clear conclusion:

The findings are that in developing countries, particularly when institutions are weak, citizenship laws matter: jus soli, being more inclusive in nature, and making it easier to assimilate and integrate newcomers, has a statistically significant and positive impact on income levels.

The conclusion confirmed their hypothesis ‘that jus sanguinis makes integration more difficult, and hence negatively impacts economic development’. The IMF identified four main areas where citizenship laws can have an impact on a country’s development: 1) distorting investment; 2) political instability and corruption; 3) reducing public sector efficiency; and 4) distorting the labour market.

Starting with the labour market, it is clear that distortions may arise when large groups of residents are barred from professions that are reserved for nationals. Investment may equally be distorted in countries where many residents do not have the nationality. Their precarious position may lead to investments with a short-time horizons and may also have the result that they have an incentive to store their money overseas, tend to diversify their business investments rather than focus on one sector, and refrain from specializing because they prefer to go into assets that are easily re-deployable.

Another point is that minority groups without citizenship obviously cannot vote or impact public life through democratic means. As a result, they will have to draw attention to themselves by other means, which in the worst case may lead to military suppression and consequently weakening growth due to misallocation of funds to the military budget. In addition to political instability, the vulnerability of non-citizens may lead to influencing the political process through non-democratic means and they may be forced to take recourse to bribes and patronage relationships. Consequently, these non-citizen communities do not necessarily benefit from a strong state and may actually have an incentive to weaken it. The IMF refers to the Lebanese diaspora in Colombia and Sierra Leone, where these communities have either acquired citizenship (by ius soli in Colombia) or have remained non-citizens for several generations (due to ius sanguinis in Sierra Leone). According to the IMF, this had led to the Lebanese community being well-integrated and committed to well-being of the State in Colombia but not in Sierra Leone.

Finally, the IMF concludes that ‘government spending may not be optimal in the presence of marginalized groups’. While there are no specific studies on the impact of nationality laws on public sector efficiency, the IMF, referring to other general studies, assumes that ‘divisions, whether ethnic, religious or linguistic ones, often negatively impact public sector performance, increasing patronage, lowering level of trust among the population and ultimately impacting negatively on economic development’.

While the IMF focuses heavily on whether ius soli is a more inclusive ground for acquisition of citizenship than ius sanguinis, one could say it essentially argues for the introduction of what some commentators have called ‘stakeholder citizenship’, meaning that ‘all those, and only those individuals, who have a stake in the future of a politically organised society have a moral claim to be recognised as its citizens and to be represented in democratic self-government … Stakeholdership in this sense is not a matter of individual choice, but is determined by basic facts of an individual’s biography’.

Author: Dr. Olivier Vonk