Migration – trade nexus revisited: Empirical evidence from Turkish emigrants in OECD countries

In recent decades, economists seek to find the answers of two very fundamental questions “why has global trade grown, and what are the consequences of that growth?”. Two answers that come to mind immediately are trade liberalisation and falling transportation costs. Another possible explanation is that trade has grown because economies have converged in economic size. A fourth source may be increased outsourcing. And as another factor the international movement of people may play a significant role on international trade. The declining cost of travel and communications has lowered information barriers and encouraged migration across national borders. The current paper aims at testing the impact of migration on bilateral trade in an augmented panel gravity model framework. To this end the relationship between Turkish emigrant stock in the 13 OECD countries and bilateral trade volume (imports and exports) for the years 2000-2012 was analysed. Economic size and geographical distance between trading partners were controlled. Empirical results show that there is a significant impact of migration on bilateral trade both in terms of imports and exports. On the other hand, as expected, economic size and distance have positive and negative effect respectively on trade.