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The Causal Impact of Trade on Migration: A Gravity Model Estimation

Author

Listed:
  • Rosmaiza Abdul Ghani

    (University of Waikato)

  • Michael P. Cameron

    (University of Waikato)

  • William Cochrane

    (University of Waikato)

  • Matthew Roskruge

    (Massey University)

Abstract

Studies on the causal impact of trade on migration are rare. Most previous studies have instead looked at the impact of migration on trade. The few empirical studies that have a causal interpretation have focused either on a single country, a single region, or within the members of a single trade agreement. This paper addresses the research question, does an increase in bilateral trade flows cause an increase in bilateral migration? We employ a novel instrumental variables strategy, using World Trade Organisation (WTO) affiliation and average tariff rates as instrumental variables within a gravity model framework. This approach mitigates against the endogeneity problem and allows us to extract the causal association between bilateral trade flows and bilateral migration flows. In the model, we employ data for 248 countries over the period 1990-2010. Our preferred estimator is the Poisson Pseudo-Maximum Likelihood Estimator, since it better handles the sparse nature of the data. Our findings suggest that trade is a statistically significant causal driver of migration. Based on our results, migration flows from country i to country j would increase by 11.3 percent if the corresponding trade flows increased by 10 percent.

Suggested Citation

  • Rosmaiza Abdul Ghani & Michael P. Cameron & William Cochrane & Matthew Roskruge, 2020. "The Causal Impact of Trade on Migration: A Gravity Model Estimation," Working Papers in Economics 20/01, University of Waikato.
  • Handle: RePEc:wai:econwp:20/01
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    international trade; international migration; gravity model; causality;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy

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