Skilled Migration and Business Networks

Abstract

The role of migrants' networks in promoting cross border investments has been stressed in the literature, possibly making migration and FDI complements rather than substitutes in the long run. In this paper, we estimate the magnitude of such business network externalities in dynamic empirical models of FDI-funded capital accumulation. We use original data on capital and migration stocks rather than flows. Regarding migrants, we distinguish the total and skilled diasporas abroad. In both cross-sectional and panel frameworks, we find evidence of strong network externalities, mainly associated with the skilled diaspora. © 2008 Springer Science+Business Media, LLC.