How does immigration affect modes of foreign market access: trade and FDI?

ABSTRACT

This article presents a study of the effects of immigration on trade and FDI. Our analysis is distinct from previous work because it systematically examines the interactions between immigration, trade and FDI. Previous studies treated FDI–immigration relationships as being independent of the modes of foreign market access. Using bilateral data of Japan and 28 other economies for the period 1996–2011, our analysis shows that FDI inflows become more dominant compared to imports when skilled immigration flows increase and less dominant when unskilled immigration flows increase. The results suggest that the relevant policy instruments as regards the promotion of trade, FDI and immigration should vary depending on economic goals, such as current account balances and labour shortages.

KEYWORDS:

• Immigration
• FDI
• trade

JEL CLASSIFICATION:

• F21
• F22
• F23

Acknowledgements

I would like to thank Jin Ke and Jingkai Hong for their research assistance and acknowledge the financial support from the Grants-in-Aid for Scientific Research (No. 16K03650) and Aoyama Gakuin University. The funding source had no involvement in the study design, analysis and interpretation of data, the writing of the report, and the decision to submit the article for publication. I would like to thank Editage (www.editage.jp) for English language editing.

Disclosure statement

No potential conflict of interest was reported by the author.

Notes

¹ http://www.un.org/en/development/desa/population/migration/publications/populationfacts/docs/MigrationPopFacts20154.pdf (last accessed on 2 November 2016).

² http://unctad.org/en/PublicationsLibrary/webdiaeia2016d1_en.pdf (last accessed on 2 November 2016).

³ http://www.jftc.or.jp/kids/kids_news/japan/item.html (last accessed on 2 November 2016).

Additional information

Funding

This work was supported by the financial support from Grants-in-Aid for Scientific Research [No. 16K03650] and Aoyama Gakuin University.