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Skilled emigration, business networks and foreign direct investment

Skilled emigration, business networks and foreign direct investment
Skilled emigration, business networks and foreign direct investment
In a global context foreign direct investment (FDI) and migration substitute one another in the matching process between workers and firms. However, as labor flows can lead to the formation of business networks, migration can actually facilitate FDI in the long-run. We first present a stylized model for a small open economy illustrating these offsetting effects. We then use U.S. data on bilateral labor inflows and capital outflows to measure the extent of contemporaneous substitutability and dynamic complementarity between migration and FDI. We find that brain drain and FDI inflows are negatively correlated contemporaneously but that skilled migration is associated with future increases in FDI inflows. We also find suggestive evidence of substitutability between current migration and FDI for migrants with secondary education, and of complementarity between past migration and FDI for unskilled migrants.
brain drain, foreign direct investment inflows, migrant ties and business networks
503
University of Southampton
Kugler, Maurice
4c79c98c-1810-4351-bf16-faeec2227e45
Rapoport, Hillel
38f0dcf0-fdd5-4a15-8af2-090b0bc7697d
Kugler, Maurice
4c79c98c-1810-4351-bf16-faeec2227e45
Rapoport, Hillel
38f0dcf0-fdd5-4a15-8af2-090b0bc7697d

Kugler, Maurice and Rapoport, Hillel (2005) Skilled emigration, business networks and foreign direct investment (Discussion Papers in Economics and Econometrics, 503) Southampton. University of Southampton

Record type: Monograph (Discussion Paper)

Abstract

In a global context foreign direct investment (FDI) and migration substitute one another in the matching process between workers and firms. However, as labor flows can lead to the formation of business networks, migration can actually facilitate FDI in the long-run. We first present a stylized model for a small open economy illustrating these offsetting effects. We then use U.S. data on bilateral labor inflows and capital outflows to measure the extent of contemporaneous substitutability and dynamic complementarity between migration and FDI. We find that brain drain and FDI inflows are negatively correlated contemporaneously but that skilled migration is associated with future increases in FDI inflows. We also find suggestive evidence of substitutability between current migration and FDI for migrants with secondary education, and of complementarity between past migration and FDI for unskilled migrants.

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Published date: 2005
Keywords: brain drain, foreign direct investment inflows, migrant ties and business networks

Identifiers

Local EPrints ID: 34791
URI: https://eprints.soton.ac.uk/id/eprint/34791
PURE UUID: ef40183c-d7e3-49f1-be88-2195b0c092b8

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Date deposited: 16 May 2006
Last modified: 17 Jul 2017 15:49

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