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Migration, Trade and Income

Author

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  • Ortega, Francesc

    (Queens College, CUNY)

  • Peri, Giovanni

    (University of California, Davis)

Abstract

This paper explores the relationship between openness to trade, immigration, and income per person across countries. To address endogeneity concerns we extend the instrumental-variables strategy introduced by Frankel and Romer (1999). We build predictors of openness to immigration and to trade for each country by using information on bilateral geographical and cultural distance (while controlling for country size). Since geography may affect income through other channels, we also control for climate, disease environment, natural resources, and colonial origins. Most importantly, we also account for the roles of institutions and early development. Our instrumental-variables estimates provide evidence of a robust, positive effect of openness to immigration on long-run income per capita. In contrast, we are unable to establish an effect of trade openness on income. We also show that the effect of migration operates through an increase in total factor productivity, which appears to reflect increased diversity in productive skills and, to some extent, a higher rate of innovation.

Suggested Citation

  • Ortega, Francesc & Peri, Giovanni, 2013. "Migration, Trade and Income," IZA Discussion Papers 7325, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp7325
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    File URL: https://docs.iza.org/dp7325.pdf
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    4. Docquier, Frédéric & Lodigiani, Elisabetta & Rapoport, Hillel & Schiff, Maurice, 2016. "Emigration and democracy," Journal of Development Economics, Elsevier, vol. 120(C), pages 209-223.
    5. Trax, Michaela & Brunow, Stephan & Suedekum, Jens, 2015. "Cultural diversity and plant-level productivity," Regional Science and Urban Economics, Elsevier, vol. 53(C), pages 85-96.
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    9. Alfonso Cebreros & Daniel Chiquiar & Mónica Roa & Martin Tobal, 2017. "Notes to Understand Migration Policy with International Trade Theoretical Tools," Working Papers 2017-03, Banco de México.
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    More about this item

    Keywords

    geography; international migration; trade; income per person; productivity; institutions; diversity;
    All these keywords.

    JEL classification:

    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers

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