Abstract
This paper analyses the impact of education networks on the FDI from the United States and United Kingdom to 167 countries during 1999–2011. Proxies of networks are international students in the United States and United Kingdom and American and British alumni associations abroad. Results show that international students boost British FDI, while their influence on American FDI is weaker and restricted to non-OECD economies. International alumni associations strongly attract both American and British FDI to the alumni home countries. The different impact of education networks on American and British FDI is partly related to the two countries’ use of soft and hard power. The pro-FDI effects of student ties are disrupted by the use of hard power.
Highlights
According to UNESCO’s definition and statistics, international students are students who move to a foreign country for the purpose of tertiary studies.1 They were 50.000 in 1950, 2.1 million in 2002, and 3.4 million in 2010
The basic question I seek to examine is whether international students in United States and United Kingdom and alumni abroad influence the volume of foreign direct investments (FDI) from the two host countries to the students’ home countries
The coefficient is robust to the introduction of the Central Intelligence Agency (CIA) variable among the covariates, while, as in previous tests, CIA interventions have no direct effect on FDI (Model 2, Table 4)
Summary
According to UNESCO’s definition and statistics, international students are students who move to a foreign country for the purpose of tertiary studies. They were 50.000 in 1950, 2.1 million in 2002, and 3.4 million in 2010. This paper tests the influence of university ties on countries’ bilateral economic exchanges, in particular, on the foreign direct investments (FDI) from the United States and United Kingdom into 167 students’ home countries. Previous expectations are that all kinds of soft power, by increasing trust between countries (Guiso, Sapienza, and Zingales 2009), have a positive effect on bilateral FDI, that wars have a negative influence (Martin, Mayer, and Thoenig 2008), and covert action has a positive one (Berger et al, 2013). Regarding the latter, they are restricted to nonOECD partner countries.
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