Abstract
In this chapter, we aim to add to the literature that looks at the link between FDI, trade, and migration. In contrast to existing studies, we consider flows of capital, trade variables, and migrants across 16 destinations and 198 origin countries over 12 years (2000–2012). We distinguish between the flow of capital (FDI) and the flow of goods and services (trade). Our results show that migration is a main driver of FDI flows in our sample. We find that for a ten percent increase in migration this year, FDI flows next year will be roughly 5.7% higher. Further, the effect of migration on imports or exports is of similar magnitude. Overall, these findings support the results in the previous literature finding that migrant networks increase capital and trade flows. Further, once we deviate from a constant-elasticity model, we do not find evidence for non-constancy in the relationship between migration and FDI. The squared migration term that we include in our regression model is insignificant. This also holds for imports. However, for exports we find evidence for a non-constant elasticity. Overall, our results highlight the importance of immigration policies as a means to increase FDI and trade flows between countries.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Notes
- 1.
These OECD countries are Australia, Austria, Belgium, Canada, Denmark, Finland, Germany, Italy, Netherlands, New Zealand, Norway, Spain, Sweden, Switzerland, UK, and USA. Belgium is not included in the FDI dataset.
- 2.
Some of the values for migration flows are zeros, 2.42% in analysing FDI flows and 10.4% in analysing trade flows. We considered using the inverse hyperbolic sine (IHS) transformation, which retains zeros, as suggested by Burbidge et al. (1988). This transformation assigns zeros to observed values of zeros. We instead assigned zeros to the logarithm of zero migration flows just as HIS transformation would, equivalent to changing zeros to ones before taking the logarithm. We compared our results to the results obtained with HIS transformation. They were almost identical.
References
Aburn, A., & Wesselbaum, D. (2017). Gone with the wind: International migration. Otago Discussion Paper.
Bastos, P., & Silva, J. (2012). Networks, firms, and trade. Journal of International Economics, 87(2), 352–364.
Benassy-Quere, A., Coupet, M., & Mayer, T. (2007). Institutional determinants of foreign direct investment. The World Economy, 30(5), 764–782.
Buch, C. M., Kleinert, J., & Toubal, F. (2006). Where enterprises lead, people follow? Links between migration and FDI in Germany. European Economic Review, 50, 2017–2036.
Burbidge, J. B., Magee, L., & Robb, A. L. (1988). Alternative transformations to handle extreme values of the dependent variable. Journal of the American Statistical Association, 83(401), 123–127.
Burchardi, K., Chaney, T., & Hassan, T. (2018). Migrants, ancestors, and foreign investments. Review of Economic Studies, 0, 1–39. https://doi.org/10.1093/restud/rdy044.
Chaney, T. (2014). The network structure of international trade. American Economic Review, 104(11), 3600–3634.
Cohen, L., Gurun, U. G., & Malloy, C. (2017). Resident networks and corporate connections: Evidence from World War II Internment Camps. Journal of Finance, 72(1), 207–248.
Fagiolo, G., & Mastrorillo, M. (2014). Does human migration affect international trade? A complex-network perspective. PLos ONE, 9(5).
Felbermayr, G. J., & Jung, B. (2009). The pro-trade effect of the brain drain: Sorting out confounding factors. Economics Letters, 104(2), 72–75.
Feng, X., Lin, F., & Sim, N. C. S. (2018). The effect of language on foreign direct investment. Oxford Economic Papers, 1–23.
Genc, M., Gheasi, M., Nijkamp, P., & Poot, J. (2012). The impact of immigration on international trade: a meta‐analysis. In P. Nijkamp, J. Poot, & M. Sahin (Eds.), Migration impact assessment (pp. 301–337). Cheltenham: Edward Elgar.
Gheasi, M., Nijkamp, P., & Rietveld, P. (2013). Migration and foreign direct investment: Education matters. The Annals of Regional Science, 51, 73–87.
Girma, S., & Yu, Z. (2002). The link between immigration and trade: Evidence from the UK. Weltwirtschaftliches Archiv, 138, 115–130.
Gould, D. (1994). Immigrants links to the home countries: Empirical implication for U.S. bilateral trade flows. Review of Economics and Statistics, 76(2), 302–316.
Gurevich, T., & Herman, P. (2018). The dynamic gravity dataset: 1948–2016. USITC Working Paper 2018-02-A.
Hatzigeorgiou, A. (2010). Does immigration stimulate foreign trade? Evidence from Sweden. Journal of Economic Integration, 25(2), 376–402.
Jaffe, A. B., Trajtenberg, M., & Henderson, R. (1993). Geographic localization of knowledge spillovers as evidenced by patent citations. The Quarterly Journal of Economics, 108(3), 577–598.
Javorcik, B. S., Özden, C., Spatareanu, M., & Neagu, I. C. (2011). Migrant networks and foreign direct investment. Journal of Development Economics, 94(2), 151–190.
Kugler, M., & Rapoport, H. (2011). Migration, FDI, and the margins of trade. CID Working Paper, No. 222.
Kugler, M., & Rapoport, H. (2007). International labor and capital flows: Complements or substitutes? Economics Letters, 94(2), 155–162.
Larch, M., Wanner, J., Votov, Y. V., & Zylkin, T. (2019). Currency unions and trade: A PPML re-assessment with high-dimensional fixed effects. Oxford Bulletin of Economics and Statistics, 81(3), 487–510.
Lücke, M., & Stöhr, T. (2018). Heterogeneous immigrants, exports and foreign direct investment: The role of language skills. World Economics, 41, 1529–1548.
Parrota, P., Pozzoli, D., & Sala, D. (2016). Ethnic diversity and firms. European Economic Review, 89, 248–263.
Parsons, C., & Vezina, P.-L. (2018). Migrant networks and trade: The Vietnamese boat people as a natural experiment. Economic Journal, 128(612), F210–F234.
Rauch, J. E., & Casella, A. (2003). Overcoming informational barriers to international resource allocation: Prices and ties. Economic Journal, 113(484), 21–42.
Rauch, J. E., & Trindade, V. (2002). Ethnic Chinese networks in international trade. Review of Economics and Statistics, 84(1), 116–130.
Silva, S. J., & Tenreyro, S. (2006). The log of gravity. Review of Economics and Statistics, 88(4), 641–658.
Tomohara, A. (2017). How does immigration affect modes of foreign market access: Trade and FDI? Applied Economics Letters, 24(18), 1280–1284.
Tong, S. Y. (2005). Ethnic networks in FDI and the impact of institutional development. Review of Development Economics, 9(4), 563–580.
Yotov, Y. V., Piermartini, R., Monteiro, J.-A., & Larch, M. (2016). An advanced guide to trade policy analysis: The Structural gravity model. Geneva: WTO.
Zylkin, T. (2017). PPML_PANEL_SG: Stata module to estimate “Structural Gravity” models via Poisson PML. https://ideas.repec.org/c/boc/bocode/s458249.html.
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2021 The Author(s), under exclusive license to Springer Nature Switzerland AG
About this chapter
Cite this chapter
Genç, M., Wesselbaum, D. (2021). The Impact of Immigration on Foreign Market Access: A Panel Analysis. In: Kourtit, K., Newbold, B., Nijkamp, P., Partridge, M. (eds) The Economic Geography of Cross-Border Migration. Footprints of Regional Science(). Springer, Cham. https://doi.org/10.1007/978-3-030-48291-6_21
Download citation
DOI: https://doi.org/10.1007/978-3-030-48291-6_21
Published:
Publisher Name: Springer, Cham
Print ISBN: 978-3-030-48290-9
Online ISBN: 978-3-030-48291-6
eBook Packages: Economics and FinanceEconomics and Finance (R0)