Using the Gravity Equation to Explain the Portuguese Immigration-trade Link

Horácio Faustino () and Nuno Leitão

No 2008/12, Working Papers Department of Economics from ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa

Abstract: This paper tests the relation between immigration and Portuguese bilateral trade. Using a panel data analysis, the results show that the stock of immigrants has a positive effect on Portuguese exports, imports and bilateral intraindustry trade. The underlying assumption is that immigration contributes to decrease the costs of transactions, which in turn promotes trade flows. The results do not confirm the hypothesis of a negative effect of immigration on Portuguese exports. Our findings suggest that when immigrants to Portugal come from a Latin partner-country, the effects on trade are stronger than in the case of immigrants from non-Latin countries. The study is based on an extended gravitational model, in order to incorporate the qualitative factors as control variables.

Keywords: intra-industry trade; immigration; gravity model; panel data. (search for similar items in EconPapers)
JEL-codes: C33 F11 F12 F22 (search for similar items in EconPapers)
Date: 2008-03
New Economics Papers: this item is included in nep-int and nep-mig
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

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