International Migration and FDI: Can Migrant Networks Foster Investments toward Origin Countries?
With the growing trends of international migration, the literature looking at the economic impact of migrants has also expanded, focusing on both the perspectives of the host and the origin countries in regard to various aspects such as labor force growth, GDP growth, and poverty rates. In the specific literature investigating the impact of migrants on origin countries, FDI is a key factor that cannot be overlooked, as it can play an essential role in the economic development of origin countries. Studies in this area have hypothesized that migrants’ impact on FDI is positive, since the information about the origin countries that migrants can provide to potential investors outside of those countries could help reduce information asymmetries and facilitate FDI flows. Through a panel regression spanning 2000-2017, this paper estimates the above relationship, focusing on migrant networks in the US and US FDI to the migrants’ origin countries, using migration data from the American Community Surveys for 86 countries of origin. The estimation, which controls for a set of gravity specifications and FDI determinants, finds a significant migrant network effect on US FDI, which is stronger for highly educated migrants.
JEL classification: F21; F22; O11; O15
Luu, Trang Heidi, "International Migration and FDI: Can Migrant Networks Foster Investments toward Origin Countries?" (2019). Honors Projects. 141.