7  Results

All results presented throughout this section are generated using Correlated Random Effects models. A constant term and country specific effects are included in all specifications. We do not, however, present the coefficients from these. We use one, two and three stars (*) to denote significance at the 10%, 5% and 1% level respectively. P-values on many of our variables fluctuate between 0.01 and 0.10.

7.1  Benchmark results

In Table 4 we report our benchmark results. As described in Section 6, the variables Average Migrant Stock, Average GDP and Average Population capture correlations between the explanatory variables and country-specific effects.

In the selection equation for exports the estimated coefficients on Zero Migrants, Foreign GDP, New Zealand GDP, World GDP and Non-English are all positive and highly significant, indicating that, all else equal, higher values for these variables imply a higher probability that trade between New Zealand and a given country takes place. The size of the increment in the probability depends on the country’s characteristics. As discussed in Section 6.3, we had expected the coefficient on Zero Migrants to be close to zero. However, the fact that it is not probably reveals more about the idiosyncrasies of the countries with zero reported migrants than it does about the relationship between migration and trade. The estimated coefficients on Population, Distance and the 1995 Dummy are all negative and highly significant indicating that, all else equal, higher values for these variables would on average result in a lower probability that trade between New Zealand and a given country takes place. The coefficient estimate on Migrant Stock, the variable of most interest to us in this study, is positive and highly significant.

In the trade equation for exports the estimated coefficients on Foreign GDP, New Zealand GDP, World GDP and the 1995 Dummy are positive while the estimated coefficients on Zero Migrants, Population, Distance and Non-English are negative. As Foreign GDP, New Zealand GDP, World GDP, Population and Distance are in logs the estimated coefficients associated with these variables are simple elasticities. The coefficient on Foreign GDP of 0.9492 for example implies that, all else equal, increasing a country’s GDP by 1% would lead to a 0.95% increase in exports to that country. For dummy variables such as our 1995 Dummy, a coefficient value of implies that, all else equal, exports to that country will be % higher when the dummy variable equals one.[10] The coefficient of 0.1358 on our 1995 Dummy implies that, all else equal, New Zealand would have exported approximately 14% more to any given country in the period between 1995 and 2001 than in the period between 1981 and 1994.

Notes – For definitions of the variables refer to Table 3. A constant term and country specific effects are included in all regressions. Dependent variables are in 1995 New Zealand dollars. Three stars (***) indicates that the coefficient is significantly different from zero at the 1% significance level, two stars (**) indicates that it is significant at the 5% level, and one star (*) indicates that it is significant at the 10% level.

The estimated coefficient on Migrant Stock is highly significant. It implies that on average a 1% increase in the stock of migrants from a given country would result in an increase in exports to that country of around 0.09%.

In the selection equation for imports the estimated coefficient on Migrant stock suggests that increasing the number of migrants from a given country will, all else equal, increase the probability that New Zealand imports from that country. Migrant Stock is statistically significant at the 10 percent level.

In the trade equation for imports the estimated coefficient on Migrant Stock is highly significant and implies that, on average, a 1% increase in the stock of migrants from a given country would result in an increase in imports from that country of around 0.15%.

In Section 6.4 we hypothesise that the effect of migrants on trade may vary depending on the type of good traded. To investigate this we present in Table 5 our results when excluding agriculture from exports and oil from imports.