Migrants, Ancestors, and Investments

82 Pages Posted: 12 Jan 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: December 2015

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 country-specific push factors and county-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 4.2 percentage points the probability that at least one local firm invests in that country, and increases by 31% the number of employees at domestic recipients of FDI from that country. The size of these effects increases with the ethnic diversity of the local population, the geographic distance to the origin country, and the ethno-linguistic fractionalization of the origin country.

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

JEL Classification: J61, L14, O11

Suggested Citation

Burchardi, Konrad and Chaney, Thomas and Hassan, Tarek Alexander, Migrants, Ancestors, and Investments (December 2015). CEPR Discussion Paper No. DP11025. Available at SSRN: https://ssrn.com/abstract=2714265

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 )

28, rue des Saints-Pères
Paris, Paris 75007
France

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Tarek Alexander Hassan

Boston University ( email )

270 Bay State Road
Boston, MA 02215
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR) ( email )

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United Kingdom

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