Immigrant Specificity and the Relationship between Trade and Immigration: Theory and Evidence

Harry P. Bowen () and Jennifer Wu ()
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Jennifer Wu: Berlin School of Economics

Discussion Paper Series from McColl School of Business, Queens University of Charlotte

Abstract: Studies routinely document that the nature of immigrant employment is largely specific: it often concentrates in non-traded goods sectors and many immigrants often have low inter-sectoral mobility. We consider these observed characteristics of immigrant employment for the question of how immigration affects a nation’s pattern of production and trade. We model an economy producing three goods; one is non-traded. Domestic labor and capital are domestically mobile but internationally immobile. Any new wave of immigration is assumed to comprise some workers who become specific to the non-traded goods sector. The model indicates that the output and trade effects of immigration depend importantly on the sectoral pattern of employment by existing and new immigrants. Empirical investigation of the model’s prediction for the relationship between immigration and trade flows in a panel dataset of OECD countries supports the prediction that trade and immigration are complements. The implications of the model and empirical findings for immigration policy are then discussed.

Keywords: immigration; international factor mobility; specific factor; trade; non-traded goods (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cwa, nep-int, nep-lab and nep-mig
Date: 2011, Revised 2012-07-13
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Forthcoming in Southern Economic Journal

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Persistent link: http://EconPapers.repec.org/RePEc:msb:wpaper:2011-01

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