The relation between migration and FDI in the OECD from a complex network perspective

Abstract

We explore the relationship between human migration and OECD’s Foreign Direct Investment(FDI) using a gravity equation enriched with variables that account for complex - network effects.Based on a panel data analysis, we find a strong positive correlation between the migration networkand the FDI network, which can be mostly explained by countries’ economic/demographic sizesand geographical distance. We highlight the existence of a stronger positive FDI relationship inpairs of countries that are more central in the migration network. Both intensive and extensiveforms of centrality are FDI enhancing. Illuminating this result, we show that bilateral FDI betweenany two countries is further affected positively by the complex web of 'third party'corridors/migration stocks of the international migration network. Our findings are consistentwhether we consider bilateral FDI and bilateral migration figures, or we focus on the outward FDIand the respective inward migration of the OECD countries.