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When Are Diaspora Communities Willing to Finance Development at Home?:

A Survey Experiment on Diaspora Bonds

Lindsay R. Dolan (Fellow, Niehaus Center for Globalization and Governance, Princeton University) and Alexandra O. Zeitz (Ph.D. Candidate, University of Oxford)

Developing countries often depend on the wealth of diaspora communities, but under which conditions are migrants willing to sacrifice personal gain for their origin country's national welfare? On the one hand, diaspora communities may support home country governments as a means of assisting family at home or out of a sense of nationalism. On the other hand, diaspora communities may oppose home country governments, which they may have intentionally left by emigrating or come to question after leaving their country of origin. This paper investigates how social, political, and self-interested motivations explain the decisions of diaspora members to share financial capital with home country governments in the form of diaspora bonds. These bonds allow diaspora members to invest directly in the governments of origin countries, usually at below-market returns, a “patriotic discount" that encourages migrants to contribute charitably through a less-lucrative investment. We explore how national and political affinity can shape diaspora members' willingness to invest, adding to a growing literature that investigates the conditional nature of investors' risk assessments. Using a conjoint survey experiment fielded to members of the Indian diaspora in the United States, we randomly manipulate features of hypothetical bonds to measure heterogeneity in willingness to invest in Indian diaspora bonds. We conclude by discussing the relevance of findings for several African governments currently considering diaspora bonds as a potential and innovative source of development finance.

Linking In: Political Connections, Foreign Direct Investment and Corruption

Andrey Tomashevskiy (Fellow, Niehaus Center for Globalization and Governance, Princeton University)

How do firms react to the prospect of corruption in host countries? Although researchers argue that corruption is a deterrent to investment, considerable investment continues to flow to corrupt states. I argue that corruption does not deter investment when investors are able to form political connections with government officials. Due to the clandestine nature of corrupt activity, corrupt in foreign direct investment is difficult to directly study using traditional data. To examine the relationship between corruption and foreign investment, I conduct a field experiment using a sample US, UK and Canadian firms. In the field experiment, I manipulate expectations of political connections and expected corruption in host countries. This research has broad implications for political economy research on corruption, foreign investment and corporate global strategy.