Migrants, Ancestors, and Investments

91 Pages Posted: 12 Jan 2016 Last revised: 6 Feb 2016

See all articles by Konrad Burchardi

Konrad Burchardi

London School of Economics & Political Science (LSE)

Thomas Chaney

SciencesPo - Sciences Po - Department of Economics; Centre for Economic Policy Research (CEPR)

Tarek A. Hassan

Boston University; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 3 versions of this paper

Date Written: January 2016

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.

Suggested Citation

Burchardi, Konrad and Chaney, Thomas and Hassan, Tarek Alexander, Migrants, Ancestors, and Investments (January 2016). NBER Working Paper No. w21847. Available at SSRN: https://ssrn.com/abstract=2713571

Konrad Burchardi (Contact Author)

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

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Thomas Chaney

SciencesPo - Sciences Po - Department of Economics ( email )

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Centre for Economic Policy Research (CEPR) ( email )

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Tarek Alexander Hassan

Boston University ( email )

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United States

National Bureau of Economic Research (NBER) ( email )

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Centre for Economic Policy Research (CEPR) ( email )

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United Kingdom

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