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The Aggregate Effects of Trade and Migration: Evidence from OECD Countries

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Author Info

  • Ortega, Francesc

    ()
    (Queens College, CUNY)

  • Peri, Giovanni

    ()
    (University of California, Davis)

Abstract

Two large but separate bodies of literature analyze the economic effects of international trade and immigration. Given that several factors are important determinants of both trade and migration flows, the previous studies are vulnerable to a potentially serious omitted-variables bias, questioning the validity of existing estimates of the effects of trade and immigration on income. This paper provides estimates of the effects of trade and immigration on income in a unified framework. We also provide a useful decomposition of the channels at work in terms of the employment rate, the capital intensity, and total factor productivity of the receiving economy. We assemble panel data on immigration flows, output, employment and capital stocks for thirty OECD countries over the period 1980-2007. In order to identify the causal effects of trade and immigration on economic outcomes we adopt and extend the gravity-based approach in Frankel and Romer (1999). Our predictors for trade and immigration flows are based on geography and the demographic trends of each country’s trade and migration partners. We find that immigration has a large, positive effect on the employment rate of the receiving country. However, it leaves income per capita unaffected because of an offsetting negative effect on TFP. In contrast, trade flows appear to increase income per capita, mainly through TFP growth, and have no impact on the employment rate. The positive employment effect of immigration is the most robust of all the effects identified in this paper.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 5604.

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Length: 40 pages
Date of creation: Mar 2011
Date of revision:
Handle: RePEc:iza:izadps:dp5604

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Keywords: trade; international migration; income; geography;

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References

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  1. Lídia Farré & Libertad González Luna & Francesc Ortega, 2009. "Immigration, family responsibilities and the labor supply of skilled native women," Economics Working Papers 1161, Department of Economics and Business, Universitat Pompeu Fabra.
  2. Gonzalez, Libertad & Ortega, Francesc, 2008. "How Do Very Open Economies Absorb Large Immigration Flows? Recent Evidence from Spanish Regions," IZA Discussion Papers 3311, Institute for the Study of Labor (IZA).
  3. Patricia Cort�s & Jos� Tessada, 2011. "Low-Skilled Immigration and the Labor Supply of Highly Skilled Women," American Economic Journal: Applied Economics, American Economic Association, vol. 3(3), pages 88-123, July.
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Cited by:
  1. Francesco D'Amuri & Giovanni Peri, 2012. "Immigration, jobs and employment protection: evidence from Europe before and during the Great Recession," Temi di discussione (Economic working papers) 886, Bank of Italy, Economic Research and International Relations Area.
  2. Peri, Giovanni & D'Amuri, Francesco, 2010. "Immigration, Jobs and Employment Protection: Evidence from Europe," Institute of European Studies, Working Paper Series qt9rp2j8m1, Institute of European Studies, UC Berkeley.
  3. Alessandra Venturini, 2012. "Innovation and Migration," RSCAS Working Papers mpc:2012/05, European University Institute.
  4. Marchiori, Luca & Maystadt, Jean-François & Schumacher, Ingmar, 2012. "The impact of weather anomalies on migration in sub-Saharan Africa," Journal of Environmental Economics and Management, Elsevier, vol. 63(3), pages 355-374.

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