Immigration, FDI, and International Trade

This paper examines the interactions among immigrants, inbound FDI, and imports in the U.S. In testing the patterns of international movements of factors of production, most existing analyses have omitted the role of international trade. On the other hand, research on the relationship between FDI and international trade has neglected the importance of international labor movements. This study uses a vector error correction model to consider all three variables. Using U.S. annual data from 1969 to 2000, I find that labor and FDI move in the same direction and labor movements cause FDI movements. In addition, I also find that inbound FDI and imports are substitutes.