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Heterogeneous immigrants, exports and foreign direct investment: The role of language skills

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  • Matthias Lücke
  • Tobias Stöhr
Abstract
We investigate the interplay of language skills and immigrant stocks in determining bilateral FDI outstocks of OECD reporting countries. Applying a Poisson panel estimator to 2004–11 data, we find robust evidence for a positive effect of bilateral immigrants on bilateral FDI†provided that residents of the two countries have few language skills in common. We find a similar effect for immigrants from third countries that speak the language(s) of the FDI host country, making them potential substitutes for bilateral migrants. Our findings suggest that immigrants facilitate outgoing FDI through their language skills, rather than through other characteristics like cultural familiarity.

Suggested Citation

  • Matthias Lücke & Tobias Stöhr, 2018. "Heterogeneous immigrants, exports and foreign direct investment: The role of language skills," The World Economy, Wiley Blackwell, vol. 41(6), pages 1529-1548, June.
    • Handle: RePEc:bla:worlde:v:41:y:2018:i:6:p:1529-1548
    DOI: 10.1111/twec.12598
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    More about this item

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology

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