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Patterns of Migration, Trade and Foreign Direct Investment across OECD Countries

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Ben Dolman

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Abstract

Previous studies have shown that countries trade and invest more with partner countries from which they have received more migrants, presumably because migrant networks provide information on financial opportunities abroad. This literature focusing on migrants within individual countries is extended by constructing a dataset covering 28 OECD countries and up to 162 trading partners and the results confirm these bilateral correlations. The effect of migrants on trade flows is also found to be smaller where countries exchange greater direct investment, suggesting that more formal business networks partly displace the effects of migrant networks. The data set also allows analysis of whether migrants increase the aggregate trade and investment of their country-of-residence, a question not previously addressed in the literature. This paper shows that migrants have a much larger effect on the directions of international trade and investment than on aggregate volumes. In the case of trade, this is shown to be consistent with the theory underpinning the gravity equation.

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Paper provided by DEGIT, Dynamics, Economic Growth, and International Trade in its series DEGIT Conference Papers with number c012_030.

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Length: 87 pages
Date of creation: Jun 2007
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Handle: RePEc:deg:conpap:c012_030

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