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The Impact of Migration on Foreign Trade: A Developing Country Approach

  • Canavire Bacarreza, Gustavo Javier
  • Ehrlich, Laura

While the causal relationship between migration and trade has not been studied thoroughly, estimation results of gravity model approach suggest that important aspects determining trade volumes can be missed if additional factors, including migration, are not considered. The current paper aims at testing the impact of migration on foreign trade in a relatively closed small economy. We use the data of Bolivia, for the years 1990–2003. We apply gravity model, adding a migration variable to the explanatory variables. We test the impact of both, immigration and emigration on exports and imports and also on intra-industry trade. We use panel estimation including data of 30 trade partners (selected according to higher trade intensity with Bolivia). We control for the economic size and geographical location of trade partners, and for changes in terms of trade. Previous studies show an increasing effect of immigration on both exports and imports elasticities. Some studies find larger exports elasticity compared to imports elasticity, some vice versa. We could not find any studies on emigration impact on trade. Our results show relatively similar impact of both immigration and emigration on foreign trade. Positive significant effect of immigration on exports and imports is confirmed also in Bolivia, even when the migration flows in Bolivia are not as high as in the case of most countries analyzed previously. We can conclude positive effect of migration flows also on intra-industry trade. In the following analysis, we intend to control for the impact of trade agreements and openness of trade partners. We will also try to broaden the sample of trade partners used in the current estimation and to test the hypotheses on other developing countries.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 1090.

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Date of creation: 03 Jan 2006
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Handle: RePEc:pra:mprapa:1090
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  1. Dunlevy, James A. & Hutchinson, William K., 1999. "The Impact of Immigration on American Import Trade in the Late Nineteenth and Early Twentieth Centuries," The Journal of Economic History, Cambridge University Press, vol. 59(04), pages 1043-1062, December.
  2. McCallum, John, 1995. "National Borders Matter: Canada-U.S. Regional Trade Patterns," American Economic Review, American Economic Association, vol. 85(3), pages 615-23, June.
  3. Pierre-Philippe Combes & Miren Lafourcade & Thierry Mayer, 2003. "Can Business and Social Networks Explain the Border Effect Puzzle?," Working Papers 2003-02, CEPII research center.
  4. James E. Rauch & Vitor Trindade, 1999. "Ethnic Chinese Networks in International Trade," NBER Working Papers 7189, National Bureau of Economic Research, Inc.
  5. Bergstrand, Jeffrey H, 1985. "The Gravity Equation in International Trade: Some Microeconomic Foundations and Empirical Evidence," The Review of Economics and Statistics, MIT Press, vol. 67(3), pages 474-81, August.
  6. Keith Head & John Ries, 1998. "Immigration and Trade Creation: Econometric Evidence from Canada," Canadian Journal of Economics, Canadian Economics Association, vol. 31(1), pages 47-62, February.
  7. Wagner, Don & Head, Keith & Ries, John, 2002. "Immigration and the Trade of Provinces," Scottish Journal of Political Economy, Scottish Economic Society, vol. 49(5), pages 507-25, December.
  8. Sourafel Girma & Zhihao Yu, 2002. "The link between immigration and trade: Evidence from the United Kingdom," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 138(1), pages 115-130, March.
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