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Do migrants really foster trade ? the trade-migration nexus, a panel approach 1960-2000

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  • Parsons, Christopher R.

Abstract

Despite the burgeoning empirical literature providing evidence of a strong and robust positive correlation between trade and migration, doubts persist as to unobserved factors which may be driving this relationship. This paper re-examines the trade-migration nexus using a panel spanning several decades, which comprises the majority of world trade and migration in every decade. First the findings common to the literature are reproduced. Country-pair fixed effects are then used to account for unobserved bilateral factors, the implementation of which removes all of the positive impact of migration on trade. In other words the unobserved factors, a leading candidate for which it is argued is international bilateral ties, are on average strongly and positively correlated with migrant networks. Dividing the world into the relatively affluent North and poorer South, the results show that migrants from either region only affect Northern exports to the South. This is intuitive since in general countries of the North export more differentiated products and information barriers between these regions are greatest. A country-level analysis further shows that migrants may both create and divert trade. Taken as a whole, the results demonstrate the large biases inherent in cross-sectional studies investigating the trade-migration nexus and highlight the extent to which previous results have been overstated.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 6034.

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Date of creation: 01 Apr 2012
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Handle: RePEc:wbk:wbrwps:6034

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Keywords: Free Trade; Economic Theory&Research; Trade Law; Trade Policy; Emerging Markets;

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References

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  1. Scott L. Baier & Jeffrey H. Bergstrand, 2005. "Do free trade agreements actually increase members’ international trade?," Working Paper, Federal Reserve Bank of Atlanta 2005-03, Federal Reserve Bank of Atlanta.
  2. Gabriel J Felbermayr & Benjamin Jung & Farid Toubal, 2009. "Ethnic Networks, Information, and International Trade: Revisiting the Evidence," Diskussionspapiere aus dem Institut für Volkswirtschaftslehre der Universität Hohenheim, Department of Economics, University of Hohenheim, Germany 306/2009, Department of Economics, University of Hohenheim, Germany.
  3. Felbermayr, Gabriel & Toubal, Farid, 2012. "Revisiting the Trade-Migration Nexus: Evidence from New OECD Data," Munich Reprints in Economics, University of Munich, Department of Economics 20350, University of Munich, Department of Economics.
  4. Santos Silva, Joao & Tenreyro, Silvana, 2005. "The Log of Gravity," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5311, C.E.P.R. Discussion Papers.
  5. Subhayu Bandyopadhyay & Cletus C. Coughlin & Howard J. Wall, 2008. "Ethnic Networks and US Exports," Review of International Economics, Wiley Blackwell, vol. 16(1), pages 199-213, 02.
  6. Catherine Co & Patricia Euzent & Thomas Martin, 2004. "The export effect of immigration into the USA," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 36(6), pages 573-583.
  7. James E. Rauch & Vitor Trindade, 2002. "Ethnic Chinese Networks In International Trade," The Review of Economics and Statistics, MIT Press, vol. 84(1), pages 116-130, February.
  8. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," NBER Working Papers 10480, National Bureau of Economic Research, Inc.
  9. John Bryant & Murat Genç & David Law, 2005. "Trade and Migration to New Zealand," ERSA conference papers ersa05p192, European Regional Science Association.
  10. I-Hui Cheng & Howard J. Wall, 2005. "Controlling for heterogeneity in gravity models of trade and integration," Review, Federal Reserve Bank of St. Louis, issue Jan, pages 49-63.
  11. James E. Anderson & Eric van Wincoop, 2001. "Gravity with Gravitas: A Solution to the Border Puzzle," NBER Working Papers 8079, National Bureau of Economic Research, Inc.
  12. Ashok Deo Bardhan & Subhrajit Guhathakurta, 2004. "Global Linkages of Subnational Regions: Coastal Exports and International Networks," Contemporary Economic Policy, Western Economic Association International, vol. 22(2), pages 225-236, 04.
  13. James E. Rauch, 2001. "Business and Social Networks in International Trade," Journal of Economic Literature, American Economic Association, vol. 39(4), pages 1177-1203, December.
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Cited by:
  1. Genc, Murat & Gheasi, Masood & Nijkamp, Peter & Poot, Jacques, 2011. "The Impact of Immigration on International Trade: A Meta-Analysis," IZA Discussion Papers 6145, Institute for the Study of Labor (IZA).
  2. Jonathan Timmis, . "The Internet and International Trade in Goods," Discussion Papers 12/08, University of Nottingham, GEP.
  3. Felbermayr, Gabriel & Grossmann, Volker & Kohler, Wilhelm, 2012. "Migration, International Trade and Capital Formation: Cause or Effect?," IZA Discussion Papers 6975, Institute for the Study of Labor (IZA).
  4. Selim Çagatay & Murat Genç & Onur Koska, 2013. "The Impact of Immigration on International Trade in Europe: The Case of the EU-Mediterranean-Eastern Europe Zone," ERSA conference papers ersa13p376, European Regional Science Association.
  5. Hélène Ehrhart & Maëlan Le Goff & Emmanuel Rocher & Raju Jan Singh, 2012. "Does Migration Foster Exports? An African Perspective," Working Papers 2012-38, CEPII research center.
  6. Mariya Aleksynska & Giovanni Peri, 2014. "Isolating the Network Effect of Immigrants on Trade," The World Economy, Wiley Blackwell, vol. 37(3), pages 434-455, 03.
  7. Ernest Miguelez & Carsten Fink, 2013. "Measuring the International Mobility of Inventors: A New Database," WIPO Economic Research Working Papers, World Intellectual Property Organization - Economics and Statistics Division 08, World Intellectual Property Organization - Economics and Statistics Division, revised May 2013.
  8. Behncke, Nadine, 2014. "The structure of ethnic networks and exports: Evidence from Germany," Center for European, Governance and Economic Development Research Discussion Papers 198, University of Goettingen, Department of Economics.
  9. Jonathan Timmis, . "The Internet and International Trade in Goods," Discussion Papers 12/03, University of Nottingham, School of Economics.
  10. Ehrhart, Helene & Le Goff, Maelan & Rocher?, Emmanuel & Singh, Raju Jan, 2014. "Does migration foster exports ? evidence from Africa," Policy Research Working Paper Series 6739, The World Bank.
  11. repec:wip:wpaper:8 is not listed on IDEAS

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