Economic integration agreements, immigrants and trade costs
Using data on the levels of economic integration agreements (EIAs) among 172 countries (35 OECD members and 137 non-members) that span the years 1995–2009, we examine the effects of immigrants and EIA levels on bilateral trade costs between immigrants’ host and home countries and whether the influence of immigrants on trade costs varies across types of EIAs. Results obtained from the estimation of a series of augmented gravity specifications using the multi-level mixed effects model (random intercepts and coefficients) indicate that increases in the level of EIA and in the stock of immigrants are associated with declines in bilateral trade costs (measured both at the aggregate level and across sectors). However, the trade costs-reduction effect of immigrants varies non-linearly with the extent to which their host and home countries are integrated. While heterogeneous across country pairs, the effect of immigrants on trade costs remains strong even among country pairs at the peak EIA level, implying that the effects of immigrants on international economic interactions is both expansive and broader than often understood.
KeywordsEconomic integration agreements (EIA) Globalization Immigrants Mixed effects model Trade costs
JEL ClassificationF14 F15 F22
- Arvis, J., Duval, Y., & Utoktham, C. (2013). Trade costs in the developing world: 1995–2010 (World Bank Policy Research Working Paper No. 6309). The World Bank, Washington, D.C.Google Scholar
- Baier, S., Bergstrand, J., & Clance, M. (2017). Heterogeneous economic integration agreements’ effects, gravity, and welfare. Research paper series on political economy of globalization (Research Paper 2017/05).Google Scholar
- Bergstrand, J. (2017). Database on economic integration agreements. https://www3.nd.edu/~jbergstr/. Accessed April, 2017.
- Centre d’Etudes Prospectives et d’Informations Internationales (CEPII). (2017). Gravity dataset. http://www.cepii.fr/CEPII/en/bdd_modele/presentation.asp?id=8. Accessed April 1, 2017.
- Dreher, A., Gaston, N., & Martens, P. (2008). Measuring globalization—Gauging its consequences. New York: Springer.Google Scholar
- Duval, Y. Neufeld, N., & Utoktham, C. (2016). Do trade facilitation provisions in regional trade agreements matter? Impact on trade costs and multilateral spillovers. Asia-Pacific research and training network on trade (ARTNeT) (Working Paper Series 164).Google Scholar
- Freeman, R., & Pienknagura, S. (2016). Are all trade agreements equal? The role of distance in shaping the effect of economic integration agreements on trade flows (World Bank Group, Policy and Research Working Paper #7809).Google Scholar
- Gaston, N., & Nelson, D. (2013). International migration. In D. Bernhofen, R. Falvey, D. Greenaway, & U. Kreickemeier (Eds.), Palgrave handbook of international trade. London: Palgrave Macmillin UK.Google Scholar
- Goldberg, P., & Pavcnik, N. (2016). The effects of trade policy. In K. Bagwell & R. W. Staiger (Eds.), The handbook of commercial policy. Amsterdam: Elsevier.Google Scholar
- Head, K., & Mayer, T. (2000). Non-Europe: The magnitude and causes of market fragmentation in Europe. Weltwirtschaftliches Archiv/review of World Economics, 136(2), 285–314.Google Scholar
- Organization for Economic Co-operation and Development (OECD). (2017). International migration database. http://www.oecd-ilibrary.org/statistics. Accessed September, 2017.
- Rabe-Hesketh, S., & Skrondal, A. (2008). Multilevel and longitudinal modeling using stata (2nd ed.). College Station, TX: Stata Press.Google Scholar
- World Bank. (2017). World development indicators. http://data.worldbank.org/data-catalog/world-development-indicators. Accessed May 1, 2017.