Migrants, Ancestors, and Foreign Investments

90 Pages Posted: 6 Jan 2016 Last revised: 22 Jul 2017

See all articles by Konrad Burchardi

Konrad Burchardi

London School of Economics & Political Science (LSE)

Thomas Chaney

Toulouse School of Economics; University of Chicago - Department of Economics; Centre for Economic Policy Research (CEPR)

Tarek A. Hassan

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 3 versions of this paper

Date Written: May 3, 2017

Abstract

We use 130 years of data on historical migrations to the United States to show a causal effect of the ancestry composition of US counties on foreign direct investment (FDI) sent and received by local firms. To isolate the causal effect of ancestry on FDI, we build a simple reduced-form model of migrations: Migrations from a foreign country to a US county at a given time depend on (i) a push factor, causing emigration from that foreign country to the entire United States, and (ii) a pull factor, causing immigration from all origins into that US county. The interaction between time-series variation in origin-specific push factors and destination-specific pull factors generates quasi-random variation in the allocation of migrants across US counties. We find that a doubling of the number of residents with ancestry from a given foreign country relative to the mean increases by 4 percentage points the probability that at least one local firm engages in FDI with that country. We present evidence this effect is primarily driven by a reduction in information frictions, and not by better contract enforcement, taste similarities, or a convergence in factor endowments.

Keywords: migrations, foreign direct investment, international trade, networks, social ties

JEL Classification: O11, J61, L14

Suggested Citation

Burchardi, Konrad and Chaney, Thomas and Hassan, Tarek Alexander, Migrants, Ancestors, and Foreign Investments (May 3, 2017). Chicago Booth Research Paper No. 17-21. Available at SSRN: https://ssrn.com/abstract=2711012 or http://dx.doi.org/10.2139/ssrn.2711012

Konrad Burchardi

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

Thomas Chaney

Toulouse School of Economics ( email )

21 allee de Brienne
Toulouse Cedex 6, 31015
France

University of Chicago - Department of Economics ( email )

1126 East 59th Street
Chicago, IL 60637
United States

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Tarek Alexander Hassan (Contact Author)

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

HOME PAGE: http://faculty.chicagobooth.edu/tarek.hassan/index.html

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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