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Migration and foreign direct investment: education matters

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Abstract

The rapid growth in the foreign-born population in many high- and middle-income countries in recent decades has prompted much research on the socio-economic determinants and impacts of immigration. This paper investigates the relationship between the stock of foreign population by nationality living in the UK and the bilateral stock of foreign direct investment (FDI), both inward FDI into the UK and outward FDI from the UK. This study contributes to the literature on the above-mentioned association between migration and FDI, by using the UK annual data from 2001 to 2007 for 22 countries on the inward volume of FDI and for 27 countries on the outward volume of FDI. Our study finds a significant and positive relationship between migration and outward FDI. This result also holds, if we correct for endogeneity by using an instrumental variable approach. If we then include the education level of migrants living in the UK, our results indicate that the more educated migrants from a certain country are, the stronger positive effect they have on FDI in both directions (inward and outward).

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Notes

  1. Australia, Canada, China, France, Germany, Greece, India, Iran, Ireland, Italy, Jamaica, Japan, Malaysia, New Zealand, Pakistan, Poland, Portugal, South Africa, Spain, Sri Lanka, the Netherlands, and the United States.

  2. Australia, Bangladesh, Canada, China, France, Germany, Ghana, Greece, India, Ireland, Italy, Jamaica, Japan, Malaysia, New Zealand, Nigeria, Pakistan, Philippines, Poland, Portugal, South Africa, Spain, Sri Lanka, the Netherlands, the United States, Turkey, and Zimbabwe.

  3. Total population and GDP per capita of origin countries are used to capture the potential market size.

  4. This variable refers to the UK for the inward flows of FDI.

  5. The Islamic dummy is relevant, since in most Islamic countries women face restrictions on foreign travel. Clearly, this may be one of the many barriers and cannot explain the overall restrictions on travel in several Islamic countries.

  6. We refer to footnote 1 and 2 for more information about the countries.

  7. Ghana, Nigeria, Poland and Zimbabwe.

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Authors and Affiliations

  1. Department of Spatial Economics, VU University, Amsterdam, The Netherlands

    Masood Gheasi, Peter Nijkamp & Piet Rietveld

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  1. Masood Gheasi
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  2. Peter Nijkamp
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  3. Piet Rietveld
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Correspondence to Piet Rietveld.

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Gheasi, M., Nijkamp, P. & Rietveld, P. Migration and foreign direct investment: education matters. Ann Reg Sci 51, 73–87 (2013). https://doi.org/10.1007/s00168-012-0533-1

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