Migrants, Ancestors, and Foreign Investments

Konrad Burchardi (), Thomas Chaney and Tarek Hassan

The Review of Economic Studies, 2019, vol. 86, issue 4, 1448-1486

Abstract: We use 130 years of data on historical migrations to the U.S. to show a causal effect of the ancestry composition of U.S. 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 U.S. county at a given time depend on (1) a push factor, causing emigration from that foreign country to the entire U.S., and (2) a pull factor, causing immigration from all origins into that U.S. 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 U.S. counties. We find that doubling the number of residents with ancestry from a given foreign country relative to the mean increases the probability that at least one local firm engages in FDI with that country by 4 percentage points. We present evidence that 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.

Keywords: Migrations; Foreign directinvestment; International trade; Networks; Social ties (search for similar items in EconPapers)
JEL-codes: J61 L14 O11 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (48)

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Working Paper: Migrants, Ancestors and Foreign Investments (2019)
Working Paper: Migrants, Ancestors and Foreign Investments (2019)
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