the migration-trade link: immigrants or emigrants? francisco requena guadalupe serrano (universitat...

THE MIGRATION-TRADE LINK: IMMIGRANTS OR

EMIGRANTS?

Francisco Requena

Guadalupe Serrano

(Universitat de Valencia)

Business and social network links are thought to lower the informal barriers to trade that characterize transactions in the uncertain

environment of international trade.

How can migrants play a relevant role in international trade?

• They have a better knowledge about languaje, culture, preferences, institutions and regulations in their home and host countries.

• They have information about local markets and products in both countries.

SO: Possibility of lowering the transaction costs of trade and provide demand for home products.

Possibility of matching buyers and sellers in both economies through their superior knowledge.

Rauch (2001), Rauch and Trindade (2002)

Empirical literature: finds a significant and positive relationship between migration and bilateral trade flows.

We aim to investigate how the migration-trade link works considering

• bilateral trade flows between different groups of countries: (south-north trade, north-north trade, north-south trade and south-south trade)

• both emigrants (living in the partner country) and immigrants (living in the reporter country)

• Predominantly focused on: Developed countries as host economies (reporter countries)Stock of immigrants living in the host economy

• Little has been explored about these links when :Developing countries are the host economiesStock of emigrants is included in the study

Murat & Pitorese (2009): Italy Erlich & Bacarreza (2007): Bolivia

Tai (2009):Switzerland

Our database

• COMTRADE: data on bilateral export flows in year 2005.

• World Bank: data on bilateral migration stocks in year 2000.

Final sample after merging & cleansing

118 reporting countries

178 trading partners.

OECD members

No-OECD members (reporter country)

ANT, ARE, BHS, BMU, TWN

No-OECD members (no reporter country)

GDPpc between [20, 80] pct in year 2000

(reporter country)

GDPpc <20 pct in year 2000(reporter country)GDPpc between [20, 80] pct in year 2000(no reporter country)GDPpc <20 pct in year 2000

(no reporter country)

AGO, BFA, BGD, BTN, BWA, COG, COM, DJ I, DOM, DZA, ERI, GIN, GNB, GNQ, GRD, GTM, HTI, IND,IRN, KEN, KHM, KIR, LAO, LBN, LBR, LBY, LKA, LSO, MMR, MRT, NGA, NPL,PAK, SLB, SLE, SLV, SOM, ETH, MLI, RWA

"North" countries(GPD pc > 80 pct in year 2000)

"South" countries(GDPpc <80

pct in year 2000)

AUS, AUT, BEL, CAN, CHE, DEU, DNK, ESP, FIN, FRA, GBR, GRC, IRL, ITA, J PN, KOR,NLD, NOR, NZL, PRT, SWE, USA

BHR, BRB, CYP, HKG, ISL, ISR, KWT, MAC, NCL, QAT, SGP, SVN

ALB, ARG, ARM, ATG, AZE, BEN, BGR, BIH, BLR, BOL, BRA, CHL, CHN, CIV, CMR, COL, CPV, CRI, CZE, DMA, ECU, EGY, EST, FJ I, GAB, GEO, GUY, HND, HRV, HUN, IDN, J AM, JOR, KAZ, KGZ, KNA, LCA, LTU, LVA, MAR, MDA, MDV, MEX, MKD, MLT, MNG, MUS, MYS, NAM, NIC, OMN, PAN, PER, PHL, BDI, CAF, GHA, GMB, MDG, MOZ, MWI, NER, STP, TGO, UGA

118x118 excluding no-reporter countries

102x102 excluding also no-OECD countries and poorest reporters.

List of contries. 118 reporters x 178 partners

2. FOUR HYPOTHESES ABOUT THE MIGRATION-TRADE LINK

H1: The migration-trade link exists for both immigrants and emigrants.

EXPORTSCountry A Country B

Emmigrants from A

Immigrants in A

Transaction Costs

channel

Preferenceschannel

Transaction Costs

channel


EXPORTS

Country A

Immigrants in A

Transction costseffect

TransactionCosteffect

H2: The transaction costs channel is more important than the preference channel if the impact of immigration on exports is greater than the impact of emigration on trade.

Preferenceseffect

Country B

Emmigrants from A

+

Felbermayr and Toubal (2009) find a relative small preferences effect for OECD countries


H3: The migration-trade link should be stronger between trading partners with large income per capita differences (as a proxy for cultural differences).

Dissimilarity adds to the informal barriers to trade, and hence to the value of the information provided by migrant networks (Dunlevy, 2006; Girma and Yu, 2002).

Sample splitting:

North countries (GDP pc over the 80 percentile in 2000) vs. South countries

Thus,the migration-trade links should be weaker for North-North trading relationships compared to: North-South, South-North and South-South


H4: The migration-trade link should be stronger for differentiated products than for homogenous products.

Underlying presumption:

Specific information about available products, characteristics, qualities, and tastes is specially relevant for trade in differentiated products, since these goods with lower substitutability (more differentiated) are more complex and price is not the only marketing variable.

Sample splitting:

Highly Differentiated products: elasticity of substitution <2.

(Broda & Weinstein, 2006)

Thus, the pro-trade effect of migrants on differentiated products should be bigger than on homogenous products (Rauch and Trindade, 2002).

lnXij = α1 lnIMM ij + α2 lnEMI ij +α3 NIDij + α4 NEDij+

α5 lnDIST ij+ α6CONTIGij + α7 LANDLOCK ij + α8 ISLANDij + α9 LANGUAJEij +

α10 COLONYij + α11COMEX-COL ij + α12 RTAij + Пi + Пj+ uij (1)

3. Econometric model

WhereX = exportsIMMI =immigrants in the reporter (+)EMI =emigrants from de reporter (+)

Dummy variablesNID , NED =dummy variables for “0” migration flow (no effect)DIST = geodesic distance (-)LANDLOCK , ISLAND (-)

Пi , Пj =origin and destination country fixed effects.

CONTIG = common border (+)LANGUAJEi= common languaje (+)COLONY = colony-colonizer relationship (+)COMEX-COL =sharing colnizer (+)RTA = sharing a regional trade agreement (+)

Helpman, Melitz and Rubinstein (2008), two step estimation procedure: HMR

Problems:

• Firm selection bias

• Zero-trade flows selection bias

lnXij = α1 lnIMM ij + α2 lnEMI ij +α3 NIDij + α4 NEDij+

α5 lnDIST ij+ α6CONTIGij + α7 LANDLOCK ij + α8 ISLANDij + α9 LANGUAJEij +

α10 COLONYij + α11COMEX-COL ij + α12 RTAij + Пi + Пj+ uij (1)

Econometric model

Table 1. Baseline estimations of the world bilateral trade flows. OLS, Poisson and Two step HMR’s estimation procedures.

OLS Poisson Probit HMR HMR HMR118 exporters 118 exporters Selection 118 exporters 118 exporters 102 exporters178 importers 178 importers 178 importers 118 importers 102 importers

VARIABLES (1) (2) (3) (4) (5) (6)immigrants 0.173*** 0.097*** 0.0919*** 0.144*** 0.130*** 0.127***

[0.0216] [0.0160] [0.0134] [0.0116] [0.0137] [0.0154]emigrants 0.130*** 0.079*** 0.0527*** 0.125*** 0.145*** 0.140***

[0.0237] [0.0151] [0.0147] [0.0127] [0.0142] [0.0159]NID -0.719*** 0.781*** -0.0300 0.0770 0.146 0.0892

[0.105] [0.175] [0.0488] [0.0738] [0.0934] [0.118]NED -0.770*** 0.302 -0.0355 0.0624 0.0826 -0.00483

[0.110] [0.189] [0.0501] [0.0821] [0.105] [0.124]distance -2.297*** -0.533*** -0.862*** -1.139*** -1.007*** -1.052***

[0.0592] [0.0311] [0.0386] [0.0357] [0.0408] [0.0439]contiguity -0.894*** 0.459*** -1.104*** 0.238* 0.210 0.172

[0.275] [0.062] [0.262] [0.126] [0.136] [0.140]landlocked -1.031*** 0.069 -0.437*** -0.760*** -0.587*** -0.473**

[0.197] [0.147] [0.0865] [0.135] [0.174] [0.207]island -0.772* -0.562** -0.395* -0.229 -0.246 -0.328

[0.452] [0.259] [0.222] [0.305] [0.313] [0.580]language 1.287*** 0.089 0.489*** 0.177*** 0.154** 0.135

[0.104] [0.061] [0.0625] [0.0611] [0.0743] [0.0845]colony link 0.393* -0.005 -0.988** 0.682*** 0.615*** 0.522***

[0.233] [0.097] [0.410] [0.107] [0.122] [0.119]common ex-colonizer 1.431*** 0.430** 0.417*** 0.740*** 0.709*** 1.299***

[0.132] [0.205] [0.0630] [0.0852] [0.115] [0.163]rta 0.301*** 0.483*** 0.483*** 0.242*** 0.242*** 0.216***

[0.107] [0.064] [0.0888] [0.0595] [0.0658] [0.0711]religion 0.242 -0.067 0.223***

[0.181] [0.099] [0.0717]eta 0.601*** -0.0196 -0.0734

[0.0834] [0.103] [0.134]delta 0.233*** 0.205*** 0.176***

[0.0341] [0.0394] [0.0441]constant 20.62*** 15.67*** 5.682*** 17.21*** 16.68*** 17.28***

[0.659] [0.846] [0.402] [0.519] [0.577] [0.629]

P-value [imm] = [emi] [0.23] [0.49] [0.05] [0.30] [0.60] [0.44]

FE origin + destination Yes Yes Yes Yes Yes YesAdjusted R squared 0.754Pseudo R squared 0.966Observations 21182 21182 19046 14607 9774 7412

Both emigrants and immigrants affect trade positively and significantly (H1)

The H0 of equality of coefficients cannot be rejected. Then the effect of the preferences channel to promote trade is negligible (H2)

Robust results to different number of trading partners.

Adequacy of the HMR method.

Table 2. Classification of countries according to income per capita (North countries=GDPpc>80pct in 2000; South countries=GDP<80pct)

Model (4) in Table 1 (118 reporters, 178 partners)Reporter All (118) North (28) North (28) South (90) South (90)Partner All (178) South (140) North (38) North (38) South (140)Immigrant coeffi cient 0.144*** 0.0777*** 0.135*** 0.130*** 0.167***

[0.0116] [0.0143] [0.0196] [0.0214] [0.0144]Emigrant coeffi cient 0.125*** 0.169*** 0.0607*** 0.0758*** 0.131***

[0.0127] [0.0168] [0.0233] [0.0212] [0.0143]Test of equality coeffi cient Immigration = Emigration[p-value] [0.30] [0.00] [0.05] [0.15] [0.11]

Emigrants coeff. is larger than immigrants coeff. The preferences effect is relevant but smaller than the transaction cost effects.

The H0 of equality of coefficients cannot be rejected. Then the effect of the preferences channel to promote trade is negligible for developing exporter countries or North-North trade.

Robust results to different number of trading partners.

Table 3. Differentiated vs Homogenous goods. North vs. South countries (North countries=GDPpc>80pct in 2000; South countries=GDP<80pct)

Differentiated goods (sigma <2)Reporter All (118) North (28) North (28) South (90) South (90)Partner All (178) South (140) North (38) North (38) South (140)Immigrant coeffi cient 0.189*** 0.0958*** 0.137*** 0.123*** 0.162***

[0.0166] [0.0155] [0.0225] [0.0240] [0.0299]Emigrant coeffi cient 0.162*** 0.166*** 0.0157 0.0663** 0.162***


Homogenous (sigma >=2)Reporter All (118) North (28) North (28) South (90) South (90)Partner All (178) South (140) North (38) North (38) South (140)Immigrant coeffi cient 0.162*** 0.0761*** 0.163*** 0.167*** 0.183***

[0.0243] [0.0219] [0.0264] [0.0339] [0.0229]Emigrant coeffi cient 0.159*** 0.181*** 0.0935*** 0.108*** 0.146***


• Both emigrants and immigrants affect trade positively and significantly.

• Migrants seems to have a major impact through the transaction cost channel, while the preferences channel only appears to be relevant in exports from developed countries to developing countries.

•We do not observe that the most different the countries are, the larger effect of the transaction cost channel.

• We find little support for the importance of the information channel for differentited goods trade when we consider all the reporter-partner trade flows.

• We find no support in favour of the information channel enhancing differentiated goods exports by groups of countries.

CONCLUSIONS

THANK YOU VERY MUCH.

the migration-trade link: immigrants or emigrants? francisco requena guadalupe serrano (universitat...

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