Temporary Migration and Foreign Direct Investment

Abstract

The question of complementarity or substitutability of FDI and international labour mobility has not yet been answered. The substitutability assumption does not take into consideration the technological spillover of FDI in the host countries. Moreover, migration flows reveal cultural characteristics and labour force properties of their native country which may stimulate bilateral business networks, strengthening the complementarity assumption between capital and labour flows. In this paper we build a continuous time dynamic model where these offsetting forces are at work. We analyze whether, and to what extent, the increase in labour mobility might affect FDI outflows. A numerical simulation is performed showing that a higher income growth rate corresponds to a higher labour mobility. Some policy implications and further research direction are suggested

Migration and foreign direct investment: education matters

“…In contrast, the relationship between migration and FDI is an under-investigated area. A limited number of studies for example, Aroca and Maloney (2005), Tong (2005), Buch et al (2006), Kugler and Rapoport (2007), Bhattacharya and Groznik (2008), Javorcik et al (2010) and Federici and Giannetti (2010) have addressed this link, and they reported a positive and significant link between migration and FDI. Javorcik et al (2010) have shown that the stock of US FDI abroad is positively correlated with the presence of migrants.…”

Strategies for Deeper Integration: Case Study of the Baltics

“…This explanation does not confront with that of D'Agosto et al (2006) which claim that FDI increases bilateral information and knowledge on employment, wages abroad, and practices, technical and organizational procedures in foreign enterprises. Neither does it demur to Federici and Giannetti (2008) which claim that migration flows reveal cultural characteristics and labour force features that may stimulate inflows of capital to the emigrants' homelands.…”

The Impact of Temporary Migration on Source Countries

“…This paper builds upon the literature on the impacts of temporary and permanent migration on economic performance in source countries. Recent contributions along these lines include Dustmann, Fadlon, and Weiss (), Federici and Giannetti (), and Ahmed and Walmsley (). Dustmann, Fadlon, and Weiss () present a model showing that return migration can lead to a mitigation of the brain drain, or even the creation of a “brain gain,” where those who return bring back to the home country augmented local skills .…”

“…Dustmann, Fadlon, and Weiss () present a model showing that return migration can lead to a mitigation of the brain drain, or even the creation of a “brain gain,” where those who return bring back to the home country augmented local skills . Federici and Giannetti () find that temporary migrant workers stimulate foreign direct investments’ inflows in their origin countries. Using a computational general equilibrium (CGE) model, Ahmed and Walmsley () find positive effects of increased temporary migration from India on its economy.…”