Migration, Trade and Income

Francesc Ortega and Giovanni Peri

No 7325, IZA Discussion Papers from IZA Network @ LISER

Abstract: This paper explores the relationship between openness to trade, immigration, and income per person across countries. To address endogeneity concerns we extend the instrumental-variables strategy introduced by Frankel and Romer (1999). We build predictors of openness to immigration and to trade for each country by using information on bilateral geographical and cultural distance (while controlling for country size). Since geography may affect income through other channels, we also control for climate, disease environment, natural resources, and colonial origins. Most importantly, we also account for the roles of institutions and early development. Our instrumental-variables estimates provide evidence of a robust, positive effect of openness to immigration on long-run income per capita. In contrast, we are unable to establish an effect of trade openness on income. We also show that the effect of migration operates through an increase in total factor productivity, which appears to reflect increased diversity in productive skills and, to some extent, a higher rate of innovation.

Keywords: geography; international migration; trade; income per person; productivity; institutions; diversity (search for similar items in EconPapers)
JEL-codes: E25 F22 J61 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2013-04
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)

Published - published as 'Openness and Income: The Roles of Trade and Migration' in: Journal of International Economics, 2014, 92 (2), 231-251

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