Essays on Macroeconomics

The first chapter examines the role of return migration in driving innovation within India’s tech startup ecosystem, using a novel dataset constructed from web scraping of startup profiles, LinkedIn data, and patent databases. By capturing founders’ international experience, education, and innovation outcomes, the analysis reveals that returnees significantly contribute to higher inno- vation levels, particularly through patent filings. Returnee-founded startups exhibit an 18% higher rate of patent filings compared to those led by locals. The study employs OLS, Poisson regression, Coarsened Exact Matching (CEM), and Instrumental Variables (IV) to address selection bias and endogeneity concerns. U.S. immigration policy changes provide causal evidence of returnees’ impact, estimating an elasticity of substitution between returnees and locals of 1.41. This research sheds light on the critical role of returnees in fostering innovation in emerging markets. The second chapter investigates the impact of military expenditures on Foreign Direct In- vestment (FDI) inflows in low- and middle-income countries from 1990 to 2018, focusing on how armed conflict influences this relationship. Using the Arellano-Bond estimator to address dynamic panel bias and endogeneity, the analysis finds that military expenditures do not significantly affect FDI inflows in non-conflict settings. However, during conflicts, increased military spending attracts FDI, supporting the ”geoeconomic favoritism hypothesis,” which suggests that foreign investors perceive higher military expenditures as a commitment to security. The study also reveals that military spending has an immediate positive effect on FDI when a country transitions from peace to conflict but shows no significant impact when transitioning from conflict to peace. Additionally, the findings highlight that military spending attracts FDI during low-intensity conflicts but has a weaker and less robust effect during major conflicts. These results have policy implications for conflict-affected countries, emphasizing the importance of strategic military investments as a signal of security commitments to potential investors.