Emigrant and immigrant networks in FDI

Abstract

This article studies the relationship between emigration, immigration and the bilateral foreign direct investments (FDI), inward and outward, between Italy and 51 foreign countries. The results suggest that the networks of Italian emigrants abroad significantly promote both inward and outward bilateral FDI. The overall influence of immigrants is weaker. Their role is positively dependent on distance for FDI inward, only.

Notes

¹ Albania, Algeria, Argentina, Australia, Austria∗, Brazil, Bulgaria, Canada, Chile, China, S. Korea, Croatia, Denmark∗, Egypt, France∗, Germany∗, Japan, Greece∗, Hungary, India, Indonesia, Iran, Ireland∗, Israel, Libya, Luxembourg∗, Malaysia, Morocco, Mexico, Norway, Netherlands∗, Philippines, Poland, Portugal, UK∗, Czech Rep., South Africa, Romania, Russia, Singapore, Slovakia, Slovenia, Spain∗, USA, Sweden∗, Switzerland, Thailand, Tunisia, Turkey, Ukraine, Venezuela. ∗: European Union.

² Data sources are GDP: World Economic Outlook, IMF; distance: http://www.wcrl.ars.usda.gov/cec/java/lat-long.htm; emigrants: AIRE (Ministry of Interior), immigrants and international trade: ISTAT; governance quality index: Kaufmann et al. (2002).

³ The interaction is calculated as ΔFDI/Δimmigrants = a + b × distance, where the a is the parameter of immigrant stock and b of the interaction term.

⁴ This excludes the EU countries, where the propensity to invest is positive.