Courting diaspora for foreign direct investment: The conditional nature of diaspora engagement

Abstract

The paper focuses on an understudied aspect of the relationship between states and their diasporas—emigration policies attracting diaspora investment. I find that countries with weaker rule of law face particularly strong incentives to adopt diaspora engagement policies and engage in initiatives attracting diaspora investment as opposed to the countries with stronger rule of law. This argument is illustrated through an investment game between migrant investors and governments with different strengths of rule of law. It is tested by using the data from multiple levels of analysis: original and existing data examining the instances when top government officials reach out to their diasporas for investment and bilateral foreign direct investment and migration data.