Revisiting the Trade-Migration Nexus: Evidence from New OECD Data

27 Pages Posted: 12 Jun 2008

See all articles by Gabriel J. Felbermayr

Gabriel J. Felbermayr

University of Stuttgart-Hohenheim

Farid Toubal

Université Paris Dauphine; Centre d'Etudes Prospectives et d'Info. Internationales (CEPII); Centre for Economic Policy Research (CEPR)

Date Written: March 1, 2008

Abstract

International migrants contribute to bilateral trade creation if their presence reduces trade costs or entails additional demand for goods from their source countries. However, only the trade-cost channel matters for beneficial welfare gains from migration. Using new data on stocks of foreign-born individuals by skill class, we try to separately quantify those two channels. We assume that improved information affects host countries' imports and exports symmetrically, while the preference channel matters for imports only. For differentiated goods, both channels contribute evenly towards the total trade-creating effect of migration. Hence, looking at the total trade-creating effect of migration substantially overestimates the welfare gains. In line with expectations, the trade cost channel - and hence the efficiency effect - is largest with differentiated goods and for high-skilled migrants.

Keywords: Migration, International Trade, Gravity Equation

JEL Classification: F12, F22, Z13

Suggested Citation

Felbermayr, Gabriel J. and Toubal, Farid, Revisiting the Trade-Migration Nexus: Evidence from New OECD Data (March 1, 2008). Available at SSRN: https://ssrn.com/abstract=1144063 or http://dx.doi.org/10.2139/ssrn.1144063

Gabriel J. Felbermayr

University of Stuttgart-Hohenheim ( email )

Keplerstraße 17
D-70174 Stuttgart
Germany

Farid Toubal (Contact Author)

Université Paris Dauphine ( email )

Place du Maréchal de Tassigny
Paris, Cedex 16 75775
France

Centre d'Etudes Prospectives et d'Info. Internationales (CEPII) ( email )

9 rue Georges Pitard
Paris Cedex 15, F-75015
France

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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