Immigrant-led foreign direct investment and the dynamics of cross-border capital allocation in Africa

This study investigates the effect of immigration on Foreign Direct Investment in 21 African countries between 1990 and 2021. Using random effects, fixed effects, and heteroscedasticity-based identification methods in a dynamic panel model, we found that countries with higher levels of past Foreign Direct Investment inflows and a higher proportion of Foreign Direct Investment-bound immigrants are more appealing to new investors. These findings encourage a critical examination of immigration policy aimed at promptly admitting skilled and enterprising immigrants while remaining committed to ethical principles, promoting social equity, and safeguarding fundamental human rights. Immigrant investors who lead the way serve as strong drivers for Foreign Direct Investment (FDI) inflows to African countries. Our examination of 21 nations in Africa reveals that successfully attracting immigrant investors is linked to higher overall FDI. To maximize effectiveness, policymakers should concentrate on four crucial strategies: designing immigration policies that favor entrepreneurs, creating comprehensive support systems for post-investment needs, establishing special economic zones with tax benefits, and simplifying administrative procedures for initial investors. These specific interventions generate a self-sustaining cycle of FDI attraction, utilizing immigrant networks to propel long-term economic growth while upholding high ethical principles.