Immigration and Trade Creation: Evidence from the Extensive and Intensive Margins (Ana Abeliansky, Inmaculada Martinez-Zarzoso, Anna Raggl)

This paper reexamines the trade creation effects of migration using a large sample of 180 countries from 1995 to 2023. We estimate a structural gravity model of bilateral trade augmented with migration stocks, investigating whether immigration to OECD countries relates to the extensive and intensive margins of trade. To address potential endogeneity, we apply a two-step control function approach based on a first-stage gravity model of migration that exploits bilateral and time variation in migration regularization policies across OECD countries. Results obtained using PPML estimators show robust pro-trade effects of migration through the extensive margin, with non-linearities and heterogeneity across product types. The findings show that migration primarily fosters exports of new, differentiated products, while effects on the intensive margin are weaker for different types of goods. These results stress the role of migrant networks as facilitators of new trade relationships and highlight policy implications for migration and trade integration.