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Migration, FDI, and Welfare

Paul Comolli ()
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Paul Comolli: University of Kansas

Atlantic Economic Journal, 2018, vol. 46, issue 2, 179-188

Abstract: Abstract We investigate migration and foreign direct investment (FDI) for a small trading economy. Historically, immigration in small countries has been accompanied by FDI inflows (complementary capital movements). Based on the skill composition of migrants, empirical evidence finds that skilled immigration is accompanied by FDI inflows but unskilled immigration is accompanied by FDI outflows (substitutable capital movements). We prove that the Heckscher-Ohlin model cannot reconcile these apparently contradictory observations. We introduce a theoretical model in which capital and unskilled labor are sector specific, and demonstrate that this model can reconcile the historical and empirical observations on migration and FDI.

Keywords: Labor migration; FDI; International trade; Economic welfare; Fixed factors; Specific factors; F10; F20 (search for similar items in EconPapers)
Date: 2018
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Handle: RePEc:kap:atlecj:v:46:y:2018:i:2:d:10.1007_s11293-018-9579-5