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

Akinori Tomohara

Applied Economics Letters, 2017, vol. 24, issue 18, 1280-1284

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.

Date: 2017
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DOI: 10.1080/13504851.2016.1270412

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