Heterogeneous Immigrants and Foreign Direct Investment: The Role of Language Skills

26 Pages Posted: 19 Oct 2015

See all articles by Matthias Luecke

Matthias Luecke

The Kiel Institute for the World Economy; CASE - Center for Social and Economic Research

Tobias Stoehr

Kiel Institute for the World Economy; German Institute for Economic Research (DIW Berlin); IZA

Abstract

We investigate the interplay of language skills and immigrant stocks in determining bilateral FDI out-stocks of OECD reporting countries. Applying a Poisson panel estimator to 2004-2011 data, we find a robust positive effect of bilateral immigrants on bilateral FDI – provided that residents of the two countries have few language skills in common. We find a similar effect for immigrants from third countries that speak the language(s) of the FDI host country, making them potential substitutes for bilateral migrants. Our findings suggest that immigrants facilitate outgoing FDI through their language skills, rather than through other characteristics like cultural familiarity.

Keywords: migration, FDI, foreign languages, globalization

JEL Classification: F21, F22, O14

Suggested Citation

Lücke, Matthias and Stoehr, Tobias, Heterogeneous Immigrants and Foreign Direct Investment: The Role of Language Skills. IZA Discussion Paper No. 9419, Available at SSRN: https://ssrn.com/abstract=2675476 or http://dx.doi.org/10.2139/ssrn.2675476

Matthias Lücke (Contact Author)

The Kiel Institute for the World Economy ( email )

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HOME PAGE: http://www.ifw-members.ifw-kiel.de/Members/matthias_luecke_ifw_kiel_de/matthias_luecke_ifw_kiel_de/v

CASE - Center for Social and Economic Research ( email )

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Poland

Tobias Stoehr

Kiel Institute for the World Economy ( email )

German Institute for Economic Research (DIW Berlin) ( email )

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Berlin, 10117
Germany

IZA ( email )

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