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Discussion Paper Details

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Title: Migrants, Ancestors, and Investments

Author(s): Konrad B. Burchardi, Thomas Chaney and Tarek Alexander Hassan

Publication Date: December 2015

Keyword(s): foreign direct investment, international trade, migrations, networks and social ties

Programme Area(s): Economic History, International Macroeconomics and Finance and International Trade and Regional Economics

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.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=11025

Bibliographic Reference

Burchardi, K, Chaney, T and Hassan, T. 2015. 'Migrants, Ancestors, and Investments'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=11025