The Impact of Immigration on EU-15 Trade

Abstract

This study examines the impact of immigration on the volume of EU-15's bilateral trade flows. An augmented gravity model confirms previous results on the positive link between immigration and trade. Immigrants positively affect both aggregate imports and exports. However, immigrants from particular subgroups of countries have different impacts on European bilateral trade. Immigrants either from Eastern European countries or Common Border to EU-15 countries positively affect European imports and exports. In contrast, immigrants from rich countries and high-skilled immigrants have no effects.

Keywords:

• trade
• migration
• gravity models

Notes

¹ OECD. 2007. International Migration Outlook. Paris: OECD.

² EU-15: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, Sweden, United Kingdom.

³Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia, Slovenia, Romania, Bulgaria.

⁴Russia, Albania, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia, Slovenia, Turkey, Morocco.

⁵Barbados, Belize, Cape Verde, Dominica, Eritrea, Fiji, Gambia, Ghana, Guyana, Haiti, Jamaica, Malta, Mauritius, Mozambique, Samoa, Seychelles, Somalia, Suriname, Tonga, Trinidad & Tobago.

⁶Andorra, Australia, Bahamas Bahrain, Barbados, Hungary, Iceland, Israel, Japan, Korea, Kuwait, Malta, New Zealand, Norway, Norway, Saudi Arabia, Singapore, Slovak Republic, Switzerland, Trinidad & Tobago, United Arab Emirates, United States.

⁷European Commission 2007. European Economy. Brussels: EC.

⁸ Statistics in focus, Eurostat, 94/2009.

⁹OECD. 2008. International Migration Outlook. Paris: OECD

¹⁰In these countries, the proportion of immigrants with tertiary education employed and settled for less than 10 years was in 2005 at about 40%. Source: OECD. 2007. International Migration Outlook, Annual Report. Paris: OECD.

¹¹ Lowel, L. 2007. Trends in international migration flows and stocks, 1975–2005. OECD Social, Employment and Migration Working Papers N 58. Paris: OECD.

¹²All variables are in real terms and in natural logarithms.

¹³The great-circle distance is the shortest distance between any two countries.

¹⁴This database from Docquier and Marfouk (2004) as proxy for skilled immigrants it is used also in other studies such as: Felbermayr, G.J., and Jung, B. 2009. The pro-trade effect of the brain drain: Sorting out confounding factors. Economics Letters 104(2): 72–75. Bergstrand, J.H., Egger, P., and Larch, M. The New Expats: Economic Determinants of Bilateral Expatriate, FDI, and International Trade Flows. Discussion Paper, November 18, 2008. Vienna: OeNB.