Soft, hard or smart power? International students and investments abroad.

This paper analyses the impact of education networks on the FDI from the United States and United Kingdom to 167 countries during 1999-2011. Proxies of networks are international students in the US and UK and alumni associations abroad. Results show that international students boost the British FDI to their home countries, while their influence on American FDI is weak, except for students from developing economies and for international students who attended university during the Cold War. Alumni associations have a substantial impact on both American and British FDI, but especially on the latter. The stronger impact of education networks on British FDI is partly related to the different political and economic roles played by the US and UK on the world stage, and to their different use of soft and hard power. Results are robust to different econometric specifications.