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Does Trade With Labour Sending Countries Reduce Demand for Migrant Workers: A Lesson from Malaysia

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Author Info

  • Fariastuti Djafar

    ()
    (Faculty of Economics and Business, Universiti Malaysia Sarawak)

  • Mohd Khairul Hisyam Hassan

    (Faculty of Economics and Business, Universiti Malaysia Sarawak)

Registered author(s):

    Abstract

    This paper has three objectives. The first objective is to examine the long-run relationships among exports, imports, income and demand for migrant workers. This is followed by a causality test between these variables as the second objective. Finally, the third objective is to examine the extent to which exports, imports and income affect the demand for migrant workers. The study utilizes time series data and a Vector Auto Regressive (VAR) framework while examining two models, namely, Malaysia and Malaysia-Indonesia (Malindo). The findings show that all variables in the models are cointegrated. Generally, there is no short-run causality between variables in the models. In the long-run, causality runs from exports, imports and income to demand for migrant workers for the Malaysia model. There is bi-directional causality in the long-run between exports and imports, respectively, and demand for migrant workers in the Malindo model. Exports and demand for migrant workers in the Malaysia model, and exports and imports, respectively, and demand for migrant workers from Indonesia in the Malindo model are substitutes. Moreover, the income per capita for Malaysia has a non-significant negative effect on the demand for total migrant workers and a significant positive effect on the demand for migrant workers from Indonesia. The study suggests that trade can be a necessary instrument, but not a sufficient instrument for reducing the demand for migrant workers.

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    Bibliographic Info

    Article provided by Asian Economic and Social Society in its journal Asian Economic and Financial Review.

    Volume (Year): 3 (2013)
    Issue (Month): 10 (October)
    Pages: 1325-1336

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    Handle: RePEc:asi:aeafrj:2013:p:1325-1336

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    Related research

    Keywords: Export; import; income; Malaysia; Indonesia; migrant workers;

    References

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    1. Markusen, James R., 1983. "Factor movements and commodity trade as complements," Journal of International Economics, Elsevier, vol. 14(3-4), pages 341-356, May.
    2. Wagner, Don & Head, Keith & Ries, John, 2002. "Immigration and the Trade of Provinces," Scottish Journal of Political Economy, Scottish Economic Society, vol. 49(5), pages 507-25, December.
    3. Noel Gaston & Douglas R. Nelson, 2013. "Bridging Trade Theory And Labour Econometrics: The Effects Of International Migration," Journal of Economic Surveys, Wiley Blackwell, vol. 27(1), pages 98-139, 02.
    4. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
    5. Prema-chandra Athukorala & Evelyn S Devadason, 2011. "The Impact of Foreign Labour on Host Country Wages: The Experience of a Southern Host, Malaysia," Departmental Working Papers 2011-03, The Australian National University, Arndt-Corden Department of Economics.
    6. Kwiatkowski, D. & Phillips, P.C.B. & Schmidt, P., 1990. "Testing the Null Hypothesis of Stationarity Against the Alternative of Unit Root : How Sure are we that Economic Time Series have a Unit Root?," Papers 8905, Michigan State - Econometrics and Economic Theory.
    7. Philip Bodman, 1998. "A Contribution on the Empirics of Trade, Migration and Economic Growth for Australia and Canada," International Economic Journal, Taylor & Francis Journals, vol. 12(3), pages 41-62.
    8. Bowen, Harry P. & P├ędussel Wu, Jennifer, 2012. "Immigrant specificity and the relationship between trade and immigration: Theory and evidence," Working Papers 70, Institute of Management Berlin (IMB), Berlin School of Economics and Law.
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