Does immigration crowd out foreign direct investment inflows? Tradeoff between contemporaneous FDI-immigration substitution and ethnic network externalities
Economic Modelling, 2017, vol. 64, issue C, 40-47
This study examines the dynamic interactions between immigration and inward foreign direct investment (FDI) using bilateral data on these indicators between Japan and each of the 29 countries/economies of origin for both FDI and immigrants into Japan during 1996–2011. Although literature shows a positive FDI–migration relationship, I distinguish between short- and long-term effects of immigration, and show a contemporaneous negative relationship between FDI and immigration. The results show that immigration flows discourage FDI inflows (FDI–migration substitution), although larger immigration stocks induce FDI inflows (ethnic network externalities). Therefore, total effects need to be evaluated considering a tradeoff between contemporaneous substitution and the longer-term complementarity from network effects. While inward FDI promotion and immigration enhancement are often suggested as solutions to resolving shortages in domestic savings and labor, our results have implications for addressing the increasingly daunting policy issue of population aging.
Keywords: Diaspora effects; Ethnic network externalities; Population aging; Immigration; Foreign direct investment (search for similar items in EconPapers)
JEL-codes: F21 F22 F23 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:64:y:2017:i:c:p:40-47
Access Statistics for this article
Economic Modelling is currently edited by S. Hall and P. Pauly
More articles in Economic Modelling from Elsevier
Series data maintained by Dana Niculescu ().