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Migration, FDI, and Welfare

Migration, FDI, and Welfare 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. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Atlantic Economic Journal Springer Journals

Migration, FDI, and Welfare

Atlantic Economic Journal , Volume 46 (2) – Jun 4, 2018

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References (27)

Publisher
Springer Journals
Copyright
Copyright © 2018 by International Atlantic Economic Society
Subject
Economics; Economics, general; Macroeconomics/Monetary Economics//Financial Economics; Microeconomics; International Economics; Public Finance
ISSN
0197-4254
eISSN
1573-9678
DOI
10.1007/s11293-018-9579-5
Publisher site
See Article on Publisher Site

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.

Journal

Atlantic Economic JournalSpringer Journals

Published: Jun 4, 2018

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