IDEAS home Printed from https://ideas.repec.org/p/cda/wpaper/81.html
   My bibliography  Save this paper

Migration and Trade: Theory with an Application to the Eastern-Western European Integration

Author

Listed:
  • Giovanni Peri
  • Susana Iranzo

    (Department of Economics, University of California Davis)

Abstract

The remarkable increase in trade flows and in migratory flows of highly educated people are two important features of globalization of the last decades. This paper extends a two-country model of inter- and intra-industry trade to a rich environment featuring technological differences, skill differences and the possibility of international labor mobility. The model is used to explain the patterns of trade and migration as countries remove barriers to trade and to labor mobility. We parameterize the model to match the features of the Western and Eastern European members of the EU and analyze first the effects of the trade liberalization which occured between 1989 and 2004, and then the gains and losses from migration which are expected to occur if legal barriers to labor mobility are substantially reduced. The lower barriers to migration would result in significant migration of skilled workers from Eastern European countries. Interestingly, this would not only benefit the migrants and most Western European workers but, via trade, it would also benefit the workers remaining in Eastern Europe.

Suggested Citation

  • Giovanni Peri & Susana Iranzo, 2009. "Migration and Trade: Theory with an Application to the Eastern-Western European Integration," Working Papers 81, University of California, Davis, Department of Economics.
  • Handle: RePEc:cda:wpaper:81
    as

    Download full text from publisher

    File URL: https://repec.dss.ucdavis.edu/files/rNSudgkikoFDaQiwxfN4ZNXt/09-7.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Lawrence F. Katz & Kevin M. Murphy, 1992. "Changes in Relative Wages, 1963–1987: Supply and Demand Factors," The Quarterly Journal of Economics, Oxford University Press, vol. 107(1), pages 35-78.
    2. Jess Benhabib & Boyan Jovanovic, 2012. "Optimal Migration: A World Perspective," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 53(2), pages 321-348, May.
    3. Timothy J. Hatton & Jeffrey G. Williamson, 2006. "What Determines Immigration's Impact? Comparing Two Global Centuries," NBER Working Papers 12414, National Bureau of Economic Research, Inc.
    4. Wong, Kar-yiu & Yip, Chong Kee, 1999. "Education, economic growth, and brain drain," Journal of Economic Dynamics and Control, Elsevier, vol. 23(5-6), pages 699-726, April.
    5. Lucas, Robert E, Jr, 1990. "Why Doesn't Capital Flow from Rich to Poor Countries?," American Economic Review, American Economic Association, vol. 80(2), pages 92-96, May.
    6. George Psacharopoulos & Harry Anthony Patrinos, 2004. "Returns to investment in education: a further update," Education Economics, Taylor & Francis Journals, vol. 12(2), pages 111-134.
    7. Kuhn, Peter J. & McAusland, Carol, 2006. "The International Migration of Knowledge Workers: When Is Brain Drain Beneficial?," IZA Discussion Papers 2493, Institute of Labor Economics (IZA).
    8. Borjas, George J., 1996. "The earnings of Mexican immigrants in the United States," Journal of Development Economics, Elsevier, vol. 51(1), pages 69-98, October.
    9. Miyagiwa, Kaz, 1991. "Scale Economies in Education and the Brain Drain Problem," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 32(3), pages 743-759, August.
    10. Antonio Ciccone & Giovanni Peri, 2005. "Long-Run Substitutability Between More and Less Educated Workers: Evidence from U.S. States, 1950-1990," The Review of Economics and Statistics, MIT Press, vol. 87(4), pages 652-663, November.
    11. Susana Iranzo & Giovanni Peri, 2007. "Migration and Trade in a World of Technological Differences: Theory with an Application to Eastern-Western European Integration," NBER Working Papers 13631, National Bureau of Economic Research, Inc.
    12. Barro, Robert J & Lee, Jong-Wha, 2001. "International Data on Educational Attainment: Updates and Implications," Oxford Economic Papers, Oxford University Press, vol. 53(3), pages 541-563, July.
    13. Christian Broda & David E. Weinstein, 2006. "Globalization and the Gains From Variety," The Quarterly Journal of Economics, Oxford University Press, vol. 121(2), pages 541-585.
    14. Beine, Michel & Docquier, Frederic & Rapoport, Hillel, 2001. "Brain drain and economic growth: theory and evidence," Journal of Development Economics, Elsevier, vol. 64(1), pages 275-289, February.
    15. Michael A. Clemens & Lant Pritchett, 2008. "Income per Natural: Measuring Development for People Rather Than Places," Population and Development Review, The Population Council, Inc., vol. 34(3), pages 395-434, September.
    16. Michael Clemens & Lant Pritchett, 2008. "Income per natural: Measuring development as if people mattered more than places," Working Papers 143, Center for Global Development.
    17. Richard B. Freeman, 2006. "People Flows in Globalization," Journal of Economic Perspectives, American Economic Association, vol. 20(2), pages 145-170, Spring.
    18. Bhagwati, Jagdish & Rodriguez, Carlos, 1975. "Welfare-theoretical analyses of the brain drain," Journal of Development Economics, Elsevier, vol. 2(3), pages 195-221, September.
    19. Friedberg, Rachel M, 2000. "You Can't Take It with You? Immigrant Assimilation and the Portability of Human Capital," Journal of Labor Economics, University of Chicago Press, vol. 18(2), pages 221-251, April.
    20. Rauch, James E., 1999. "Networks versus markets in international trade," Journal of International Economics, Elsevier, vol. 48(1), pages 7-35, June.
    21. Stark, Oded, 2004. "Rethinking the Brain Drain," World Development, Elsevier, vol. 32(1), pages 15-22, January.
    22. Timothy J. Hatton & Jeffrey G. Williamson, 2005. "A Dual Policy Paradox: Why Have Trade and Immigration Policies Always Differed in Labor-Scarce Economies," NBER Working Papers 11866, National Bureau of Economic Research, Inc.
    23. Klein, Paul & Ventura, Gustavo, 2009. "Productivity differences and the dynamic effects of labor movements," Journal of Monetary Economics, Elsevier, vol. 56(8), pages 1059-1073, November.
    24. Rauch, James E, 1991. "Reconciling the Pattern of Trade with the Pattern of Migration," American Economic Review, American Economic Association, vol. 81(4), pages 775-796, September.
    25. Robert E. Hall & Charles I. Jones, 1999. "Why do Some Countries Produce So Much More Output Per Worker than Others?," The Quarterly Journal of Economics, Oxford University Press, vol. 114(1), pages 83-116.
    26. Krugman, Paul R, 1981. "Intraindustry Specialization and the Gains from Trade," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 959-973, October.
    27. Susana Iranzo & Giovanni Peri, 2009. "Schooling Externalities, Technology, and Productivity: Theory and Evidence from U.S. States," The Review of Economics and Statistics, MIT Press, vol. 91(2), pages 420-431, May.
    28. Francesco Caselli & Wilbur John Coleman II, 2006. "The World Technology Frontier," American Economic Review, American Economic Association, vol. 96(3), pages 499-522, June.
    29. Grogger, Jeffrey & Hanson, Gordon H., 2011. "Income maximization and the selection and sorting of international migrants," Journal of Development Economics, Elsevier, vol. 95(1), pages 42-57, May.
    30. Wong, Kar-yiu, 1986. "Are international trade and factor mobility substitutes?," Journal of International Economics, Elsevier, vol. 21(1-2), pages 25-43, August.
    31. Yeaple, Stephen Ross, 2005. "A simple model of firm heterogeneity, international trade, and wages," Journal of International Economics, Elsevier, vol. 65(1), pages 1-20, January.
    32. Mountford, Andrew, 1997. "Can a brain drain be good for growth in the source economy?," Journal of Development Economics, Elsevier, vol. 53(2), pages 287-303, August.
    33. David Hummels, 2007. "Transportation Costs and International Trade in the Second Era of Globalization," Journal of Economic Perspectives, American Economic Association, vol. 21(3), pages 131-154, Summer.
    34. Christian Broda & David W. Weinstein, 2004. "Variety Growth and World Welfare," American Economic Review, American Economic Association, vol. 94(2), pages 139-144, May.
    35. Klein Paul & Ventura Gustavo J, 2007. "TFP Differences and the Aggregate Effects of Labor Mobility in the Long Run," The B.E. Journal of Macroeconomics, De Gruyter, vol. 7(1), pages 1-38, May.
    36. Tito Boeri & Herbert Brücker, 2005. "Why are Europeans so tough on migrants? [‘What a difference a constant makes: how predictable are international migration flows?’ in OECD]," Economic Policy, CEPR;CES;MSH, vol. 20(44), pages 630-703.
    37. Donald R. Davis & David E. Weinstein, 2002. "Technological Superiority and the Losses from Migration," NBER Working Papers 8971, National Bureau of Economic Research, Inc.
    38. Bhagwati, Jagdish & Hamada, Koichi, 1974. "The brain drain, international integration of markets for professionals and unemployment : A theoretical analysis," Journal of Development Economics, Elsevier, vol. 1(1), pages 19-42, April.
    39. 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.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Iranzo, Susana & Peri, Giovanni, 2009. "Migration and trade: Theory with an application to the Eastern-Western European integration," Journal of International Economics, Elsevier, vol. 79(1), pages 1-19, September.
    2. Susana Iranzo & Giovanni Peri, 2007. "Migration and Trade in a World of Technological Differences: Theory with an Application to Eastern-Western European Integration," NBER Working Papers 13631, National Bureau of Economic Research, Inc.
    3. Gordon H. Hanson, 2009. "The Economic Consequences of the International Migration of Labor," Annual Review of Economics, Annual Reviews, vol. 1(1), pages 179-208, May.
    4. Frédéric Docquier & Joël Machado & Khalid Sekkat, 2015. "Efficiency Gains from Liberalizing Labor Mobility," Scandinavian Journal of Economics, Wiley Blackwell, vol. 117(2), pages 303-346, April.
    5. Luca Marchiori & I-Ling Shen & Frédéric Docquier, 2013. "Brain Drain In Globalization: A General Equilibrium Analysis From The Sending Countries' Perspective," Economic Inquiry, Western Economic Association International, vol. 51(2), pages 1582-1602, April.
    6. Felbermayr, Gabriel & Grossmann, Volker & Kohler, Wilhelm, 2012. "Migration, International Trade and Capital Formation: Cause or Effect?," IZA Discussion Papers 6975, Institute of Labor Economics (IZA).
    7. Hanson, Gordon H., 2010. "International Migration and the Developing World," Handbook of Development Economics, in: Dani Rodrik & Mark Rosenzweig (ed.), Handbook of Development Economics, edition 1, volume 5, chapter 0, pages 4363-4414, Elsevier.
    8. Narcisse Cha'Ngom & Christoph Deuster & Frédéric Docquier & Joël Machado, 2023. "Selective Migration and Economic Development: A Generalized Approach," LISER Working Paper Series 2023-06, Luxembourg Institute of Socio-Economic Research (LISER).
    9. Milo Bianchi, 2013. "Immigration Policy and Self-Selecting Migrants," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 15(1), pages 1-23, February.
    10. Michael A. Clemens, 2016. "Losing our minds? New research directions on skilled emigration and development," International Journal of Manpower, Emerald Group Publishing Limited, vol. 37(7), pages 1227-1248, October.
    11. Harald Fadinger & Karin Mayr, 2014. "Skill-Biased Technological Change, Unemployment, And Brain Drain," Journal of the European Economic Association, European Economic Association, vol. 12(2), pages 397-431, April.
    12. Harald Fadinger & Karin Mayr, 2014. "Skill-Biased Technological Change, Unemployment, And Brain Drain," Journal of the European Economic Association, European Economic Association, vol. 12(2), pages 397-431, April.
    13. Batista, Catia & Lacuesta, Aitor & Vicente, Pedro C., 2007. "Brain Drain or Brain Gain? Micro Evidence from an African Success Story," IZA Discussion Papers 3035, Institute of Labor Economics (IZA).
    14. John Gibson & David McKenzie, 2012. "The Economic Consequences of ‘Brain Drain’ of the Best and Brightest: Microeconomic Evidence from Five Countries," Economic Journal, Royal Economic Society, vol. 122(560), pages 339-375, May.
    15. Frédéric Docquier & Hillel Rapoport, 2012. "Globalization, Brain Drain, and Development," Journal of Economic Literature, American Economic Association, vol. 50(3), pages 681-730, September.
    16. Clemens, Michael & Pritchett, Lant, 2016. "The New Case for Migration Restrictions: An Assessment," Working Paper Series rwp16-054, Harvard University, John F. Kennedy School of Government.
    17. Slobodan DJADJIC & Frédéric DOCQUIER & Michael S. MICHAEL, 2019. "Optimal Education Policy and Human Capital Accumulation in the Context of Brain Drain," JODE - Journal of Demographic Economics, Cambridge University Press, vol. 85(4), pages 271-303, December.
    18. Julian Giovanni & Andrei A. Levchenko & Francesc Ortega, 2015. "A Global View Of Cross-Border Migration," Journal of the European Economic Association, European Economic Association, vol. 13(1), pages 168-202, February.
    19. Clemens, Michael A. & Pritchett, Lant, 2019. "The new economic case for migration restrictions: An assessment," Journal of Development Economics, Elsevier, vol. 138(C), pages 153-164.
    20. Michel Beine & Fréderic Docquier & Hillel Rapoport, 2008. "Brain Drain and Human Capital Formation in Developing Countries: Winners and Losers," Economic Journal, Royal Economic Society, vol. 118(528), pages 631-652, April.

    More about this item

    Keywords

    Skilled Migration; Gains from Variety; Real Wages; Eastern-Western Europe.;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cda:wpaper:81. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Letters and Science IT Services Unit (email available below). General contact details of provider: https://edirc.repec.org/data/educdus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.