The Migration and FDI Puzzle: Complements or Substitutes?

This paper analyses the link between FDI inflows and migration waves from developing countries. In addition, it investigates mechanisms through which this link works. Empirical results indicate that FDI can be seen as substitutes of migration through direct and indirect labour demand. However, the paper demonstrates that a positive relationship (complementarity effect) between FDI and migration flows takes place. In longi-tudinal analysis results indicate that the complementarity effect prevails. In cross section analysis, estimating a two equation models, we find that a substitutability effect is at work through the impact of FDI on human capital accumulation but the direct complementarity effect also prevails.