Migration Flows and Intra-Industry Trade

WorkingpapersseriesWPECON06.04MigrationFlowsandIntra-IndustryTradeAdjustmentsJoséV.Blanes(U.PablodeOlavide)JoanA.Martín-Montaner(UniversitatJaumeI)JELClassificationnumbers:F10,F14,F15,F22.Keywords:Migration,intra-industrytrade,networks.DepartmentofEconomicsMIGRATIONFLOWSANDINTRA-INDUSTRYTRADEADJUSTMENTSJoséV.Blanes*andJoanA.Martín-Montaner+UniversidadPablodeOlavide-UniversitatJaumeIABSTRACTInthispaperweanalysethelinkbetweentradeandmigration.FocusingintheexperienceofSpain,werelateamarginalindexofintra-industrytradewiththestockofforeignworkers-classifiedaccordingtotheircountryoforiginandtheirsituationintheSpanishlabourmarket.Wefocusonthepossibilitythatexistingnetworksofforeignworkersandtheirconnectionswiththeircountriesoforigincouldstimulatetradewiththehostcountry.Ourresultsshowasignificantimpactofthenumberofimmigrantswithworkpermitsonintra-industrytradeadjustment.However,thisimpactbeingpositiveornegativedependsonwhetherforeignworkersareemployeesorself-employed,thedurationoftheworkpermitsandthetypeofjobtheyoccupy.Keywords:migration,intra-industrytrade,networks.JELcodes:F10,F14,F15,F22.Correspondingauthor:*DepartamentodeEconomía,M.CuantitativoseHªEconómica,UniversidadPablodeOlavide,Ctra.UtreraKm.1,41013-Sevilla,Spain.e-mail:[e-mail]+DepartamentodeEconomía,UniversitatJaumeI,CampusdelRiuSec,12071-CastellódelaPlana,Spain.e-mail:[e-mail]:J.V.BlanesacknowledgesfinancialsupportfromCICYTSEC2003-00516andSEJ246.J.A.MartínacknowledgesfinancialsupportfromProyectoBANCAIXAP11B200H-28’spreferencestowardshome-countryproductsorbyreductionsintransactioncostsderivedfromhigherknowledgeabouttheirnativemarkets.Theformerimpliesmoreimportsfromthenativecountry,whereasthelattercouldimplymoreimports,moreexportsorboth.Thatmeansthatdependingonwhichmechanismhasabiggereffectontradeflows,immigrationcaninduceeitherinter-industryorintra-industryadjustmentofhostcountryproduction.Thepurposeofthispaperistoanalysetheeffectonimmigrationonthetypeoftradeadjustmentstakingplace.WeanalysethecaseofSpain.Itsrecentroleasfinaldestinationforimmigrantstogetherwithitsdistributionofimmigrant’shome-countriesanditsintermediatedevelopmentlevelbetweendevelopingcountriesandthemostdevelopedcountriesmakesitanidealcandidateforourpurposes.WeexplainbilateralandindustrialindexesofSpanishmarginalintra-industrytradewithnon-EUcountriesbycombiningimmigrantandproductcharacteristics,andalsoincludeseveralvariablestocontrolforcountrycharacteristics.Thecontributionofthepaperistwofold.First,itprovidesnewevidenceaboutthedeterminantsofintra-industrytrade.Second,itfocuses,forthefirsttimeintheliteraturetoourknowledge,ontherelationshipbetweenimmigrantscharacteristicsandintra-industrytrade.Itusesanewapproachtoanalysethemechanismsthatexplainthelinkbetweenimmigrationandbilateraltradebyrelatingimmigrationtothetypeoftradeadjustmentinducedbyit.Therelationshipbetweenimmigrationandintra-industrytrade2(2005)alsousingSpanishdata.However,ourpapermakesadditionalcontributions.First,weusenotonlybilateralbutalsoindustryleveltradedata.Second,weconsiderindividualcharacteristicsofimmigrantsrelatedtotheroletheyplayintheSpanishlabourmarket.Thisallowsustoexplainmorefullynotonlytheexistenceofalinkbetweenimmigrationandintra-industrytradebutthemechanismsbehindthislink.Thepaperisstructuredasfollows.Insectiontwoweintroducesometheoreticalissuesaboutthelinkbetweentradeandmigration.Insectionthreewepresentthedataandeconometricmodel.Econometricresultsarepresentedinsectionfour,Sectionfivesummarizethemainfindingsandconclusions.II.THELINKBETWEENTRADEANDMIGRATION:THEORETICALISSUESThereisadebateconcerningwhetherlabourmovementsandtradearecomplementsorsubstitutes1.Thefactorprizeequalizationtheoremprovidesastronginferencethattradeandimmigrationaresubstitutes,asfarasweareworkingundertheHeckscher-Ohlinassumptions.Thus,aspeoplemovefromthesourcetothehostcountry,theirrelativefactorendowmentsbecomemoresimilar(providedtherearenochangesincapitalstocks).Thismeansthattherewillbenoroomfortradebaseduponcomparativeadvantage.However,thingscanberatherdifferentifthebilateraltradeisintra-industry,anditdependsontheexistenceofscaleeconomiesandproductdifferentiation.Inthiscontext,tradecouldappearevenwhentradepartnershaveexactlythesamefactorendowments.Therefore,wearelikelytofindacomplementaryrelationshipbetweeninternationalmigrationandtrade.Onecommonfeaturetoallthesituationsaboveisthatmigrationme