Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/18819
Authors: 
Kugler, Maurice
Rapoport, Hillel
Year of Publication: 
2005
Series/Report no.: 
CESifo Working Paper 1455
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.
Subjects: 
brain drain
foreign direct investment inflows
migrant ties and business networks
JEL: 
O41
F43
F22
Document Type: 
Working Paper

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