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Migration, Trade and Income

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  • Ortega, Francesc

    ()
    (Queens College, CUNY)

  • Peri, Giovanni

    ()
    (University of California, Davis)

Abstract

This paper explores the relationship between openness to trade, immigration, and income per person across countries. To address endogeneity concerns we extend the instrumental-variables strategy introduced by Frankel and Romer (1999). We build predictors of openness to immigration and to trade for each country by using information on bilateral geographical and cultural distance (while controlling for country size). Since geography may affect income through other channels, we also control for climate, disease environment, natural resources, and colonial origins. Most importantly, we also account for the roles of institutions and early development. Our instrumental-variables estimates provide evidence of a robust, positive effect of openness to immigration on long-run income per capita. In contrast, we are unable to establish an effect of trade openness on income. We also show that the effect of migration operates through an increase in total factor productivity, which appears to reflect increased diversity in productive skills and, to some extent, a higher rate of innovation.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 7325.

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Length: 42 pages
Date of creation: Apr 2013
Date of revision:
Publication status: forthcoming in: Journal of International Economics, 2014.
Handle: RePEc:iza:izadps:dp7325

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Keywords: productivity; income per person; trade; international migration; geography; institutions; diversity;

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References

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Cited by:
  1. Alberto Alesina & Johann Harnoss & Hillel Rapoport, 2013. "Birthplace Diversity and Economic Prosperity," CReAM Discussion Paper Series 1304, Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London.

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