Abstract
When will members of a diaspora lend to the government in their country of origin? Diasporans make important contributions to developing countries by sending remittances and investment home. However, little is known about when and why diaspora communities are willing to invest in the governments of their country of origin. Diasporans may invest at home because of their affinity with their country of origin, whether in the form of national pride, stake in economic development, or political support. This paper investigates whether these different affinity-based motivations explain the interest of diaspora members in purchasing home country government bonds. We use a survey experiment fielded to members of the Pakistani diaspora living in the United States to investigate diaspora members’ willingness to invest in home government bonds. We randomly manipulate the framing of the bond to measure heterogeneity in willingness to buy the home country government bond. We find that national pride and a stake in economic development are the strongest drivers for an individual’s choice to invest in a home country bond. We corroborate these findings with follow-up interviews that reveal the resonance of appeals to national identity and developmental support. The findings have implications for the design and marketing of diaspora bonds.
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Data availability statement
The datasets generated by the survey and analyzed in this study will be made available upon publication
Notes
World Bank estimates of personal remittances received (current US$) Series: BX.TRF.PWKR.CD.DT.
We use the term diaspora to refer to both migrants and their descendants, since both can maintain a strong attachment to the “homeland,” even if the descendants of migrants are born in their country of residence.
Members of the diaspora can be constrained in their ability to invest in their homeland by capital controls or restrictions on non-resident investment. Our study focuses on their motivation rather than their right to invest, as laws on foreign investment vary considerably.
The pre-registered hypotheses can be found at https://doi.org/10.17605/OSF.IO/T5GMX.
In the context of U.S. war bonds, the marketing of 1919 “Liberty Loans” after public opinion and the mid-term elections had turned against Woodrow Wilson, sought to emphasize that buying loans was a patriotic expression of support for the country, rather than partisan support for Wilson, with Treasury materials saying, “No party is seeking to borrow money: the American Government is making the loan” (Dixon, 1995, 74)
The parallel to patriotic investment in domestic bonds here is in the enlisting of Boy Scout troops and women’s groups to market WWI-era “Liberty Loans” (Hilt & Rahn, 2016).
We also pre-registered the following hypothesis under this heading, but since almost all respondents have close family members in their country of origin, we had insufficient variation to test this hypothesis: Individuals who have close family members living in their country of origin will be more likely to exhibit the dynamics described in H2.
As in previous hypotheses, this phrasing is taken from the marketing of the 2019 Pakistani Banao Certificate diaspora bond.
Israel Bonds (accessed 03/15/19): https://www.israelbonds.com/About-Us/DCI-Israel-Bonds.aspx
Embassy of the Federal Democratic Republic of Ethiopia to the Commonwealth of Australia (accessed 11/06/20): http://www.ethiopianembassy.net/gerd/
Salient Features of Pakistan Banao Certificates (accessed 11/06/20): https://www.pakistanbanaocertificates.gov.pk/img/infographic.jpg
World Bank International Debt Statistics, Disbursements on external debt, general government sector (DT.DIS.DEGG.CD).
Note that due to U.S. law, we could only transfer U.S. Treasury bonds to U.S. citizens, so non-citizens received a $100 gift card instead.
We encountered a similar ceiling on our sample size with our India survey, which is why we jettisoned some design elements of the India survey in order to dedicate our statistical power toward testing our core hypotheses.
This is the video we used: https://www.youtube.com/watch?v=IuyejHOGCro
There is some imbalance in assignment to treatment, however, we verified that the randomization code worked correctly.
Respondents learned about credit ratings in the educational video they watched at the beginning of the exercise.
Respondents were incentivized with a $20 gift card.
Interview C. 01/26/2021.
Interview A. 01/26/2021.
Interview E. 01/27/2021.
Interview D. 01/27/2021.
Interview A. 01/26/2021.
Interview C. 01/26/2021.
Interview B. 01/26/2021.
Interview C. 01/26/2021.
Interview D. 01/27/2021.
Interview A. 01/26/2021.
Interview E. 01/27/2021.
News24 (2017).
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Acknowledgements
For helpful comments and conversations, we thank Yehonatan Abramson, Simone Dietrich, Ryan Jablonski, Alexander Kuo, Mauro Lanati, David Leblang, Daniel Nielson, Hannah Postel, Adrien Shin, and participants in Princeton’s Pizza and Politics Workshop, Oxford Politics and IR Workshop, the Tri-State IPE Working Group, the NYU Florence WESSI Workshop, the EUI Migration Policy Conference, ISA 2019, PEIO 2020, and IPES 2020. For research assistance, we thank Arifa Abbas. Any errors are our own.
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Author contributions to the paper were as follows: development of research question and theoretical framework: L.D. (50%), A.Z. (50%); research design and survey instrument: L.D. (50%), A.Z. (50%); statistical analysis: L.D. (90%) A.Z. (10%); interviews: L.D. (50%), A.Z. (50%); writing: L.D. (30%), A.Z. (70%). The order of authors is chosen alphabetically.
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Dolan, L.R., Zeitz, A.O. Migration and development finance: A survey experiment on diaspora bonds. Rev Int Organ 19, 185–215 (2024). https://doi.org/10.1007/s11558-023-09505-4
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DOI: https://doi.org/10.1007/s11558-023-09505-4
Keywords
- Migration
- Diaspora
- Government bonds
- Diaspora bonds
- Sovereign debt
- Development finance
- Home bias
- Nationalism
- Patriotism
- Survey experiment
- Interviews
- Pakistan
- India