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The Aggregate Effects of Trade and Migration: Evidence from OECD Countries

Author

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  • Ortega, Francesc

    (Queens College, CUNY)

  • Peri, Giovanni

    (University of California, Davis)

Abstract

Two large but separate bodies of literature analyze the economic effects of international trade and immigration. Given that several factors are important determinants of both trade and migration flows, the previous studies are vulnerable to a potentially serious omitted-variables bias, questioning the validity of existing estimates of the effects of trade and immigration on income. This paper provides estimates of the effects of trade and immigration on income in a unified framework. We also provide a useful decomposition of the channels at work in terms of the employment rate, the capital intensity, and total factor productivity of the receiving economy. We assemble panel data on immigration flows, output, employment and capital stocks for thirty OECD countries over the period 1980-2007. In order to identify the causal effects of trade and immigration on economic outcomes we adopt and extend the gravity-based approach in Frankel and Romer (1999). Our predictors for trade and immigration flows are based on geography and the demographic trends of each country’s trade and migration partners. We find that immigration has a large, positive effect on the employment rate of the receiving country. However, it leaves income per capita unaffected because of an offsetting negative effect on TFP. In contrast, trade flows appear to increase income per capita, mainly through TFP growth, and have no impact on the employment rate. The positive employment effect of immigration is the most robust of all the effects identified in this paper.

Suggested Citation

  • Ortega, Francesc & Peri, Giovanni, 2011. "The Aggregate Effects of Trade and Migration: Evidence from OECD Countries," IZA Discussion Papers 5604, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp5604
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    References listed on IDEAS

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    1. Patricia Cortés & José Tessada, 2011. "Low-Skilled Immigration and the Labor Supply of Highly Skilled Women," American Economic Journal: Applied Economics, American Economic Association, vol. 3(3), pages 88-123, July.
    2. Libertad González & Francesc Ortega, 2008. "How Do Very Open Economies Absorb Large Immigration Flows? Recent Evidence from Spanish Regions," Economic Reports 06-08, FEDEA.
    3. Farré Lidia & González Libertad & Ortega Francesc, 2011. "Immigration, Family Responsibilities and the Labor Supply of Skilled Native Women," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 11(1), pages 1-48, June.
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    Cited by:

    1. Valentina Di Iasio & Ernest Miguelez, 2022. "The ties that bind and transform: knowledge remittances, relatedness and the direction of technical change [Brain drain or brain bank? The impact of skilled emigration on poor-country innovation]," Journal of Economic Geography, Oxford University Press, vol. 22(2), pages 423-448.
    2. Heid, Benedikt & Larch, Mario, 2012. "Migration, trade and unemployment," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 6, pages 1-40.
    3. Dierk Herzer, 2017. "Refugee Immigration and Total Factor Productivity," International Economic Journal, Taylor & Francis Journals, vol. 31(3), pages 390-414, July.
    4. Ilse Ruyssen & Glenn Rayp, 2014. "Determinants of Intraregional Migration in Sub-Saharan Africa 1980-2000," Journal of Development Studies, Taylor & Francis Journals, vol. 50(3), pages 426-443, March.
    5. Ikhenaode, Bright Isaac & Parello, Carmelo Pierpaolo, 2022. "Migration, technology diffusion and convergence in a two-country AK Growth Model," MPRA Paper 115340, University Library of Munich, Germany.
    6. Alessandra Venturini, 2012. "Innovation and Migration," RSCAS Working Papers mpc:2012/05, European University Institute.
    7. Rosmaiza Abdul Ghani & Michael P. Cameron & William Cochrane & Matthew Roskruge, 2020. "The Causal Impact of Trade on Migration: A Gravity Model Estimation," Working Papers in Economics 20/01, University of Waikato.
    8. Joan Llull, 2016. "Understanding international migration: evidence from a new dataset of bilateral stocks (1960–2000)," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 7(2), pages 221-255, June.
    9. Alessandra Venturini & Claudio Fassio & Sona Kalantaryan, 2015. "Human Resources and Innovation: Total Factor Productivity and Foreign Human Capital," Discussion Papers 29, Central European Labour Studies Institute (CELSI).
    10. William L. Allen & Matthew D. Bird & Luisa Feline Freier & Isabel Ruiz & Carlos Vargas-Silva, 2024. "Migration policy preferences and forms of trust in contexts of limited state capacity," Discussion Papers 2024-09, Nottingham Interdisciplinary Centre for Economic and Political Research (NICEP).
    11. Aparna Sharma & Ruchi Sharma & Sidheswar Panda, 2022. "The role of technological capabilities and gap in the cross-country patenting: an empirical investigation," International Economics and Economic Policy, Springer, vol. 19(1), pages 1-27, February.
    12. Eva Spring & Volker Grossmann, 2016. "Does bilateral trust across countries really affect international trade and factor mobility?," Empirical Economics, Springer, vol. 50(1), pages 103-136, February.
    13. Frédéric Docquier & Bright Isaac Ikhenaode & Hendrik Scheewel, 2022. "Immigration, welfare, and inequality: How much does the labor market specification matter?," Review of International Economics, Wiley Blackwell, vol. 30(5), pages 1315-1347, November.
    14. Xiaoxia Shi & Haiyun Liu & Joshua Sunday Riti, 2019. "The role of energy mix and financial development in greenhouse gas (GHG) emissions’ reduction: evidence from ten leading CO2 emitting countries," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 36(3), pages 695-729, October.
    15. Marcus H. Böhme & Sarah Kups, 2017. "The economic effects of labour immigration in developing countries: A literature review," OECD Development Centre Working Papers 335, OECD Publishing.
    16. Peri, Giovanni & D'Amuri, Francesco, 2010. "Immigration, Jobs and Employment Protection: Evidence from Europe," Institute of European Studies, Working Paper Series qt9rp2j8m1, Institute of European Studies, UC Berkeley.
    17. Francesco D'Amuri & Giovanni Peri, 2016. "Immigration, Jobs, And Employment Protection: Evidence From Europe Before And During The Great Recession," World Scientific Book Chapters,in: The Economics of International Migration, chapter 5, pages 153-185 World Scientific Publishing Co. Pte. Ltd..
    18. Marchiori, Luca & Maystadt, Jean-François & Schumacher, Ingmar, 2012. "The impact of weather anomalies on migration in sub-Saharan Africa," Journal of Environmental Economics and Management, Elsevier, vol. 63(3), pages 355-374.
    19. Kacey Douglas, 2015. "International knowledge flows and technological advance: the role of migration," IZA Journal of Migration and Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 4(1), pages 1-16, December.

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    More about this item

    Keywords

    trade; international migration; income; geography;
    All these keywords.

    JEL classification:

    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers

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