Ricerc@Sapienza

As to the first research question, on banking flows, our innovation is in the interaction of the pull and push drivers in explaining cross-border flows, which is derived analytically from the solution to investors¿ portfolio decision problem, while the empirical literature typically employs dummy interaction terms to capture such interactions. Our approach allows to account for the heterogeneity of cross-border flows across countries and types of flows, hence the different vulnerability of countries to adverse spillover effects. Our empirical framework is useful for the analysis of different pull drivers, i.e. institutional quality, the stringency of the regulatory framework (Ahmed and Zlate, 2014; Milesi-Ferretti and Tille, 2011; Bremus and Fratzscher, 2014) in the face of different push conditions, i.e., easing/tightening liquidity conditions in global markets. This has implications for the appropriate policy responses to capital inflows by emerging markets, in terms of the timing and the intensity of the actions, such as the use of capital controls to prevent the contagion from a global overheating. In this case, the estimated coefficient of the interaction term predicts the impact of the policy action (increase in capital controls) on inflows, taking into account the global liquidity developments.
As for the second research question, The literature on the relation between migrant networks and inward inflows is very scarce (particularly so for indirect investments), often in the form of case studies. For example, Saxenian (1999) illustrates the case of Silicon Valley, where complementarity of immigrant labor and capital has been a key ingredient in the successful development of the region. At a more general level, using state-level German data, Buch et al. (2006) find that migrants from a particular country induce FDI from that country, but only if the country is high income (which the authors interpret as a proxy for high skilled migrants). On the other hand, a more general form of complementarity arises between foreign labor and capital (i.e. between migrants from any country and capital flows from a specific foreign country). Flisi and Murat (2011) also show that the geography of market integration matters. Comparing the case of U.K., France, Germany with Italy and Spain, they show that the presence of a migrant network is a source of inwards FDI for the first three countries but it becomes a source of outward FDI for Spain and Italy.
All these results suggest that migration network could significantly affect investment flows. However, largely because of the lack of good panels, most of the existing literature suffers from endogeneity problems, in the form of either simultaneity between regressors (FDI flows may affect the incentive to migrate and vice versa) or omitted variable bias (both might depend on one or more common factors). In all these cases, however, the direction of the bias is quite unpredictable. In the case of the US, Javorcik et al (2011) explicitly address the endogeneity problem instrumenting migration with the 30 year-lagged stock of migrant and a number of source country characteristics such as distance from the EU, presence of US military bases, cost of acquiring a passport, etc.
Finally, concerning the macroeconomic impact of migration on macroeconomic stability and growth, the most of the theoretical contributions on migration and growth consider domestic and immigrant workers as perfect substitutes in production, in this research we will follow Parello (2017) and use a two-level production technology in which natives and immigrants enter production as imperfect substitutes. As the issue is controversial and the empirical literature has so far given no clear-cut result on this issue (see, e.g., Cortes, 2008; Card, 2009; Ottaviano and Peri, 2012), in order to plug migrant labor into the production activity of the receiving economy we will focus on a CES aggregator of domestic and migrant workers able to capture all degrees of substitutability between the two types of workers. All these aspects are both new for this branch of the literature and worth studying