Diasporas, Political Institutions, and International Investment
There is a small but growing literature on the effect of diaspora networks on flows of global trade and capital. This literature, however, only explores the direct effect of co-ethnic networks on international trade and investment. But the argument about the role of co-ethnic networks has important implications beyond this direct effect. Because transnational networks of migrants and co-ethnics help transmit information across national borders they can serve as a substitute for weak institutions or poor arbitration mechanisms that may otherwise hinder cross-border economic activity.