Immigration and Trade: Evidence from the 1920s Quota Acts
55 Pages Posted: 16 Sep 2020
Date Written: July 28, 2020
We exploit a large shock to mass migration, the 1920s US Quota Acts, to causally identify the effect of migration restrictions on trade. Estimating a Difference-in-Difference (DiD) model with heterogeneous treatment effects, we derive several conclusions: First, the 1920's quotas lowered US-European migration, especially migration of farmers from Southern and Eastern (SE) Europe, with negative effects for US-European imports and exports. Specifically, a 1% rise in quota exposure reduces imports by 0.05% and exports by 0.06%. Second, we observe a decline in Southern and Eastern European exports to other SE countries, and SE primary sector exports in general. Lastly, we show that the 1920's quotas reduced SE primary sector output above and beyond the decline associated with reduced primary sector exports. These findings are robust across different sample-periods, quota exposure measures, and estimation methods. We argue that the changing composition of migration post-quota can explain these results.
Keywords: Trade, Migration, 1920 Quota
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