Labour mobility and interprovincial trade in Canada

This study estimates the impact of interprovincial and international migration on interprovincial trade using annual data from 1981- 2016 for Canadian provinces. We apply both the gravity and the spatial trade models for estimation using a number of panel estimators. We find that the endogeneity issue should be addressed when estimating the relationship between migration and interprovincial trade. Estimated results show that interprovincial and international net migrations are positive and significant determinants for interprovincial trade of Canada. Interprovincial immigration is more influential than international immigration in explaining interprovincial trade. Interprovincial imports are influenced more by interprovincial and international migration than interprovincial exports. Province-wise estimates indicate that Quebec, British Columbia, Saskatchewan, and New Brunswick are positively affected by interprovincial migration. Among them, all except New Brunswick are also positively affected by international migration. The gravity and the spatial trade models are useful to explain Canadian interprovincial trade. The pooled OLS, fixed effects, 2SLS and SGMM estimators are used in this study. Our results are robust to different estimation methods and alternative measures using both the flow and the stock net migration in Canada’s provinces.