Trade and Migration: Some New Evidence from the European Mass Migration to Argentina (1870–1913)

During the first wave of globalization, Argentina was among the most internationally integrated economies, experiencing a rising trend in trade openness and a tremendous increase in labor due to migration. In this paper, we empirically show the central role immigration had in boosting exports and imports in the years 1870–1913 by considering Argentine bilateral trade and migration from eight European countries (Austro-Hungarian Empire, Belgium, France, Germany, Italy, Spain, Switzerland, and United Kingdom). We use a migration-augmented gravity model to estimate the contribution of the massive inflows of Europeans, and we find that the main pro-trade effect was on imports: a percent 10% increase in migrants from a particular country would increase imports by up to 8% from that same country. We do not find the same effect on exports. The disproportionate decrease in transportation rather than communication costs may explain why the latter are relatively more decisive for exports than for imports. To overcome the problem of reverse causality and endogeneity, we use migration flows to the US from the eight European countries as an instrumental variable. In so doing, we aim at capturing the same push (but not Argentine pull) factors inducing European out-migration.