The relation between migration and FDI in the OECD from a complex network perspective

TL;DR

This study investigates how complex migration networks influence foreign direct investment among OECD countries, revealing that centrality and third-party migration corridors significantly enhance FDI flows.

Contribution

It introduces a complex-network perspective to analyze the migration-FDI relationship, emphasizing the role of network centrality and third-party effects in FDI patterns.

Findings

Migration network centrality correlates with increased FDI.

Third-party migration corridors positively influence bilateral FDI.

Both bilateral and outward inward migration figures show consistent results.

Abstract

We explore the relationship between human migration and OECD's foreign direct investment (FDI) using a gravity equation enriched with variables that account for complex-network effects. Based on a panel data analysis, we find a strong positive correlation between the migration network and the FDI network, which can be mostly explained by countries' economic/demographic sizes and geographical distance. We highlight the existence of a stronger positive FDI relationship in pairs of countries that are more central in the migration network. Both intensive and extensive forms of centrality are FDI enhancing. Illuminating this result, we show that bilateral FDI between any two countries is further affected positively by the complex web of "third party" corridors/migration stocks of the international migration network (IMN). Our findings are consistent whether we consider bilateral FDI and bilateral migration figures, or we focus on the outward FDI and the respective inward migration of the OECD countries.