Abstract
AbstractDoes international migration contribute to the spread of global commerce? Recent work demonstrates the relevance of international migration for patterns of investment, focusing on migrants’ role in facilitating investment from their host country to their country of origin. By contrast, we investigate the potential for migrants to attract inward investment into their host country. As customers, migrants shape the composition of the market in the country where they live, such that global networks of migrants can shape investment decisions of co-national firms. Focusing on a single sector, banking, we identify the mechanisms by which international migration attracts foreign investment. First, migrants may prefer home country banks, especially if they are excluded from financial services in their host country. Second, migrants require financial institutions to send remittances to their country of origin. We test these arguments using a global sample of foreign bank ownership data and find that bilateral migrant networks are a predictor of cross-border banking investment. These findings speak to how the composition of markets affects international investment, as well as the reinforcing relationship between two features of globalization: international migration and financial integration.
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