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Immigrant Specificity and the Relationship between Trade and Immigration: Theory and Evidence

  • Harry P. Bowen


    (McColl School of Business, Queens University of Charlotte)

  • Jennifer Pedussel Wu


    (Berlin School of Economics)

Studies routinely document that the nature of immigrant employment is largely specific: it often concentrates in non-traded goods sectors and many immigrants often have low inter-sectoral mobility. We consider these observed characteristics of immigrant employment for the question of how immigration affects a nation’s pattern of production and trade. We model an economy producing three goods; one is non-traded. Domestic labor and capital are domestically mobile but internationally immobile. Any new wave of immigration is assumed to comprise some workers who become specific to the non-traded goods sector. The model indicates that the output and trade effects of immigration depend importantly on the sectoral pattern of employment by existing and new immigrants. Empirical investigation of the model’s prediction for the relationship between immigration and trade flows in a panel dataset of OECD countries supports the prediction that trade and immigration are complements. The implications of the model and empirical findings for immigration policy are then discussed.

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Paper provided by McColl School of Business, Queens University of Charlotte in its series Discussion Paper Series with number 2011-01.

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Length: 44 pages
Date of creation: 2011
Date of revision: 13 Jul 2012
Publication status: Forthcoming in Southern Economic Journal
Handle: RePEc:msb:wpaper:2011-01
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