CEPII, Recherche et Expertise sur l'economie mondiale
Third Country Effect of Migration: the Trade-Migration Nexus Revisited

Erik Figueiredo
Luiz Renato Lima
Gianluca Orefice

 Highlights :
  • This paper quantifies the trade-creating effect of international migrants and identifies a new channel through which immigrants coming from third high (tariff) protected countries can affect bilateral specific import flows (third country effect).
  • According to our preferred estimations, a ten percent increase in the flow of bilateral migrants increases bilateral imports by 0.45% (preference or information channel).
  • A ten percent increase in the flow of migrants coming from third high (tariff) protected countries increases bilateral imports by 0.27% (third country effect).

 Abstract :
This paper proposes a new channel through which migrants can affect the import demand of the host country. In migrating from origin to destination country, migrants observe a change in the prices of the bundle of consumable goods. In particular, the migration decision can reflect a reduction in the price of imported goods (due to lower applied tariff) for the consumption bundle of migrants: emigration towards less (tariff) protected countries allows the consumption of products that were prohibitively protected in the origin countries of migrants. To test this channel we estimate the import demand effect of migrant groups coming from third high (tariff) protected countries. We use a theory-grounded gravity estimations and a fresh econometric techniques able to address both the zero migration flows problem and the endogeneity of migrants. Our results suggest that such a third-country immigrant effect is significant and positive.

 Keywords : Trade-Migration | Third-Country Effect | Quantile Regression | Imputation

 JEL : F14, C21, C36
CEPII Working Paper
N°2016-22, September 2016

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