International migration and FDI: Can migrant networks foster homeward investments?

With the growing trend and magnitude of international migration, research efforts looking at the economic impact of migrants have also increased in number. They point towards several positive effects on both the destination country and origin country’s economies. In line with this body of work, the influence of migrants on FDI coming from the destination countries to the origin countries cannot be overlooked, as FDI can play an essential role in the origin countries’ economic development. This impact has been hypothesized to be positive in the existing literature due to migrant networks’ ability to reduce information and transaction costs and break down certain investment-related barriers. Through a regression analysis on a panel dataset extending the period from 2000-2017, this paper will estimate the above relationship, focusing on how migrants in the US influence FDI coming from the US to their origin countries. The regression builds upon standard FDI determinant and gravity models, using data on foreign-born population from the US Census Bureau for 86 countries of origin and data on stocks of US FDI to those countries from the Bureau of Economic Analysis. The results of this paper will inform international efforts to collaborate on policies regarding migration and economic development