Diaspora Investment Impact: Transnational ties and homeland investment
Abstract: The diaspora has increasingly become the focus of attention in the migration and development field. As scholars and policymakers look for ways to harness the diasporas for development purposes, studying the factors that determine the impact of diaspora presence on economic outcomes becomes increasingly relevant. This thesis contributes to the study of migration linkages by examining how diasporas' transnational ties influence cross-border capital flows. While previous literature has found evidence of a migration-investment nexus - demonstrating that larger migrant stocks are associated with more investment to the home country - earlier models have largely ignored the non-tangible linkages of diaspora engagement. In this thesis we propose three main determinants for diasporas' investment impact: (i) absolute and relative diaspora population; (ii) patriotic sentiments; and (iii) the extent of community participation. Estimating a cross-sectional gravity model for portfolio and direct investment, we find a positive relationship between diaspora presence and homeland investment. We show that nationalism and blind patriotism appear to dampen the overall positive effect of diaspora presence on investment, while constructive patriotism and a culture of active community participation are both associated with an enhanced diaspora investment impact. We conclude that tangible and non-tangible linkages jointly influence outcomes within migration systems and that to fully understand the diaspora's role in bridging the home and the host country, the nature of migrants' transnational ties has to be considered. Under the right circumstances, significant linkage effects can be captured by mobilising diasporic engagement.
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