1 Introduction
Migrants have language skills, local knowledge, and access to international networks that can help overcome barriers to trade. Increasing the number of migrants from a country might therefore be expected to stimulate trade with that country. Econometric analyses in the United States, Canada, Britain, and Spain find support for this hypothesis. One study even found a link between migration and trade for internal migration between different regions of France (Combes, Lafourcade and Mayer 2003). Such effects are potentially important in explaining New Zealand’s recent trade performance, as the country’s migrant population has become significantly larger and more diverse over the past 20 years.
This paper presents an econometric analysis of the effects of migration on trade in New Zealand. It tests the hypothesis that, all else equal, a larger stock of migrants from a given country increases New Zealand’s imports from and exports to that country. As with previous studies of migration and trade, the starting point is a gravity model of trade, in which trade is a function of the size of two economies and the distance between them. As well as looking at the overall relationship between migration and trade, the paper also examines whether the relationship between migration and trade differs with the nature of the goods traded, the migrants’ origin countries, and the number of migrants. Previous studies have been restricted to merchandise trade. We also look briefly at the effect of migration on international tourism (which in 2001 earned New Zealand an estimated $NZ5.1 billion).[1] The analysis draws on an unusually rich dataset—panel data on more than 170 countries over 21 years—which enhances our ability to deal with the econometric problems of unobserved heterogeneity and selection bias.
Section 2 of the paper gives a brief overview of recent trends in migration and trade in New Zealand. Section 3 summarises ideas from the international literature on why migration might stimulate trade. Section 4 provides some evidence on the activities of migrants in New Zealand. Section 5 summarises the results from previous econometric analyses. Section 6 describes our methodology, and Section 7 our results. The final section summarises our findings and discusses their implications.
Notes
- [1]This figure excludes international airfares and applies to the year to June. It was obtained from the International Visitors Survey, on the Tourism New Zealand website www.tourisminfo.govt.nz.
