Migration and the Location of MNEs Activities. Evidence from Italian Provinces

This paper investigates the link between migration and inward FDI in narrow geographies. Our results, based on 1,147 greenfield investment projects made by 895 MNEs into Italian provinces (NUTS3) over the 2003-2015 period, confirm a positive effect of the stock of immigrants on FDI, but no robust effects of emigrants. However, beyond this average effect lies significant heterogeneity. By unraveling this heterogeneity, we shed light on the potential mechanisms underlying this relation. Our results are consistent with an important role of demand and information channels, but not with an effect through the labour market. On the one hand, immigrants are not a factor that attracts more labour-intensive investments. On the other hand, the effect of immigrants is stronger when information and, to a lesser extent, market demand are more important. Overall, our paper bears significant implications for local development policy that partially contrast with the current public discourse on immigration.

Keywords: Foreign Direct Investment; Migration; Location Choice; Information Effect; Demand Effect; Conditional Logit; Mixed Logit

F22; F21; R30