This paper shows that the bilateral FDI of Germany, France and the U.K. are positively
related to the stocks of immigrants present in these economies, and, in the case of Italy, of the
Italian emigrants living abroad. In the three former countries, however, these effects depend
crucially on the business networks of the skilled immigrants, without which the relation between
investments abroad and immigration is mostly negative.
The business networks of immigrants in Germany and of Italian emigrants abroad have a
stronger influence on the FDI going to the developing countries. The positive effects of diasporas
on the FDI going to the poor countries may help to alleviate the negative impact of the brain drain
caused by the skilled migration.
18
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