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Using the Gravity Equation to Explain the Portuguese Immigration-trade Link

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Author Info
Horácio Faustino
Nuno Leitão
Abstract

This paper tests the relation between immigration and Portuguese bilateral trade. Using a panel data analysis, the results show that the stock of immigrants has a positive effect on Portuguese exports, imports and bilateral intraindustry trade. The underlying assumption is that immigration contributes to decrease the costs of transactions, which in turn promotes trade flows. The results do not confirm the hypothesis of a negative effect of immigration on Portuguese exports. Our findings suggest that when immigrants to Portugal come from a Latin partner-country, the effects on trade are stronger than in the case of immigrants from non-Latin countries. The study is based on an extended gravitational model, in order to incorporate the qualitative factors as control variables.

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Publisher Info
Paper provided by Department of Economics at the School of Economics and Management (ISEG), Technical University of Lisbon. in its series Working Papers with number 2008/12.

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Date of creation: Mar 2008
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Handle: RePEc:ise:isegwp:wp122008

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Postal: Department of Economics, School of Economics and Management (ISEG), Technical University of Lisbon, Rua do Quelhas 6, 1200-781 LISBON, PORTUGAL
Web page: http://www.iseg.utl.pt/departamentos/economia/

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Related research
Keywords: intra-industry trade immigration gravity model panel data.

Find related papers by JEL classification:
C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data
F11 - International Economics - - Trade - - - Neoclassical Models of Trade
F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies
F22 - International Economics - - International Factor Movements and International Business - - - International Migration

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  1. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Blackwell Publishing, vol. 58(2), pages 277-97, April. [Downloadable!] (restricted)
  2. Rauch, James E., 1999. "Networks versus markets in international trade," Journal of International Economics, Elsevier, vol. 48(1), pages 7-35, June. [Downloadable!] (restricted)
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  3. Roger White, 2007. "Immigrant-trade links, transplanted home bias and network effects," Applied Economics, Taylor and Francis Journals, vol. 39(7), pages 839-852. [Downloadable!] (restricted)
  4. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July. [Downloadable!] (restricted)
    Other versions:
  5. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August. [Downloadable!] (restricted)
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  6. David Greenaway & Robert Hine & Chris Milner, 1994. "Country-specific factors and the pattern of horizontal and vertical intra-industry trade in the UK," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 127(1), pages 77-100, March. [Downloadable!] (restricted)
  7. Anderson, James E, 1979. "A Theoretical Foundation for the Gravity Equation," American Economic Review, American Economic Association, vol. 69(1), pages 106-16, March. [Downloadable!] (restricted)
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This page was last updated on 2008-7-2.

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