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FDI, the Brain Drain and Trade: Channels and Evidence

In: Developing Countries in the World Economy

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  • Artjoms IVLEVS
  • Jaime DE MELO

Abstract

This paper explores the links between the patterns of migration (high vs. low-skill), trade policy, and foreign direct investment (FOI) from the standpoint of sending countries. A skeleton general equilibrium model with a non-traded good and sector-specific labour is used to explore the effects of the skill-composition of exports on FOI. The model suggests that if exports are low-skill intensive, emigration of high-skill labour leads to positive FOI, suggesting that migration and FOI are complements. Cross-sectional analysis using FDI and emigration data for 102 migration-sending countries over the period 1990-2000 finds some support for this conjecture

Suggested Citation

  • Artjoms IVLEVS & Jaime DE MELO, 2015. "FDI, the Brain Drain and Trade: Channels and Evidence," World Scientific Book Chapters, in: Developing Countries in the World Economy, chapter 21, pages 533-551, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789814494908_0021
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    Cited by:

    1. Luca Marchiori & I-Ling Shen & Frédéric Docquier, 2013. "Brain Drain In Globalization: A General Equilibrium Analysis From The Sending Countries' Perspective," Economic Inquiry, Western Economic Association International, vol. 51(2), pages 1582-1602, April.
    2. Dmitry Sokolov, 2017. "Intellectual Diaspora as a Resource for Science Development: a Review of Experience in BRICS Countries (Brazil, South Africa and Russia)," Science Governance and Scientometrics Journal, Russian Research Institute of Economics, Politics and Law in Science and Technology (RIEPL), vol. 12(1), pages 25-37, March.
    3. Dominique M. Gross, 2012. "Free Mobility with the EU and Immigration of North American Brains to Switzerland: What Consequences?," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 148(IV), pages 497-530, December.
    4. Minh Tam T. Bui, 2019. "International migration and foreign direct investment within Southeast Asia," Asia-Pacific Journal of Regional Science, Springer, vol. 3(3), pages 731-755, October.
    5. Di Maria, Corrado & Lazarova, Emiliya A., 2012. "Migration, Human Capital Formation, and Growth: An Empirical Investigation," World Development, Elsevier, vol. 40(5), pages 938-955.
    6. Cuadros, Ana & Martín-Montaner, Joan & Paniagua, Jordi, 2016. "Homeward bound FDI: Are migrants a bridge over troubled finance?," Economic Modelling, Elsevier, vol. 58(C), pages 454-465.
    7. Ovielt Baltodano L'opez & Roberto Casarin, 2022. "A Dynamic Stochastic Block Model for Multi-Layer Networks," Papers 2209.09354, arXiv.org.
    8. David Procházka & Cristina Procházková Ilinitchi, 2011. "The Theoretical Relationships among Foreign Direct Investments, Migration and IFRS Adoption," European Financial and Accounting Journal, Prague University of Economics and Business, vol. 2011(4), pages 85-100.
    9. Munazah NAZEER* & Uzma TABASSUM** & Shaista ALAM***, 2017. "Banking And Telecommunication Influencing Migration In Major Cities Of Pakistan," Pakistan Journal of Applied Economics, Applied Economics Research Centre, vol. 27(1), pages 101-120.
    10. Schiff, Maurice, 2010. "Small state regional cooperation, south-south and south-north migration, and international trade," Policy Research Working Paper Series 5297, The World Bank.
    11. Cuadros, Ana & Martín-Montaner, Joan & Paniagua, Jordi, 2019. "Migration and FDI: The role of job skills," International Review of Economics & Finance, Elsevier, vol. 59(C), pages 318-332.

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    More about this item

    Keywords

    Trade Barriers and Market Structure; Quantitative Restrictions; Political Economy and Migration; Trade and the Environment;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration

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