The Aggregate Effects of Trade and Migration: Evidence from OECD Countries
Two large but separate bodies of literature analyze the economic effects of international trade and immigration. Given that several factors are important determinants of both trade and migration flows, the previous studies are vulnerable to a potentially serious omitted-variables bias, questioning the validity of existing estimates of the effects of trade and immigration on income. This paper provides estimates of the effects of trade and immigration on income in a unified framework. We also provide a useful decomposition of the channels at work in terms of the employment rate, the capital intensity, and total factor productivity of the receiving economy. We assemble panel data on immigration flows, output, employment and capital stocks for thirty OECD countries over the period 1980-2007. In order to identify the causal effects of trade and immigration on economic outcomes we adopt and extend the gravity-based approach in Frankel and Romer (1999). Our predictors for trade and immigration flows are based on geography and the demographic trends of each country’s trade and migration partners. We find that immigration has a large, positive effect on the employment rate of the receiving country. However, it leaves income per capita unaffected because of an offsetting negative effect on TFP. In contrast, trade flows appear to increase income per capita, mainly through TFP growth, and have no impact on the employment rate. The positive employment effect of immigration is the most robust of all the effects identified in this paper.
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- Libertad González & Francesc Ortega, 2008.
"How Do Very Open Economies Absorb Large Immigration Flows? Recent Evidence from Spanish Regions,"
- Libertad Gonzalez & Francesc Ortega, 2008. "How do Very Open Economies Absorb Large Immigration Flows? Recent Evidence from Spanish Regions," Development Working Papers 248, Centro Studi Luca d'Agliano, University of Milano.
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- Lidia Farre & Libertad Gonzalez & Francesc Ortega, 2009.
"Immigration, Family Responsibilities and the Labor Supply of Skilled Native Women,"
CReAM Discussion Paper Series
0916, Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London.
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- Francesc Ortega & Libertad González & Lídia Farré Olalla, 2009. "Immigration, family responsibilities and the labor supply of skilled native women," Working Papers. Serie AD 2009-19, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
- Lídia Farré & Libertad González Luna & Francesc Ortega, 2009. "Immigration, family responsibilities and the labor supply of skilled native women," Economics Working Papers 1161, Department of Economics and Business, Universitat Pompeu Fabra.
- Farré, Lídia & Gonzalez, Libertad & Ortega, Francesc, 2009. "Immigration, Family Responsibilities and the Labor Supply of Skilled Native Women," IZA Discussion Papers 4265, Institute for the Study of Labor (IZA).
- Patricia Cortés & José Tessada, 2011. "Low-Skilled Immigration and the Labor Supply of Highly Skilled Women," American Economic Journal: Applied Economics, American Economic Association, vol. 3(3), pages 88-123, July.
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