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Trade and Migration to New Zealand - WP 04/18

7.2  Extensions

We now examine whether the effect of migration varies by type of country, and we test for the effect of migration on tourism exports.

Table 6– Allowing the effect of migrants to vary by language
Variable Exports Imports
  Selection Trade Selection Trade
Migrant Stock 0.3444***(0.0378) 0.1064***(0.0171) 0.0076(0.0381) 0.2125***(0.0251)
Migrant Stock x Non-English 0.0682**(0.0267) -0.0569***(0.0099) 0.1103***(0.0245) -0.0779***(0.0138)
Zero Migrants 0.5824***(0.0922) -0.2358***(0.049) 0.3294***(0.0914) -0.1434*(0.08)
Foreign GDP 0.6023***(0.0921) 0.9573***(0.0507) -0.297***(0.0896) 1.4258***(0.073)
New Zealand GDP 3.048***(0.8134) 0.5171(0.354) 3.0609***(0.7271) 1.9893***(0.4815)
World GDP 4.1159***(0.4852) 0.4474**(0.21) -0.3396(0.4252) -0.6429**(0.2818)
Population -3.6561***(0.2545) -0.6495***(0.1092) -0.0825(0.2272) -0.6279***(0.1363)
Distance -2.6439***(0.1587) -2.782***(0.0357) -2.2619***(0.131) -1.0345***(0.0428)
Non-English 0.2225*(0.1253) 0.4058***(0.057) 0.7494***(0.1186) -0.0038(0.0832)
Average Migrant Stock -0.1056***(0.0354) 0.2543***(0.0174) 0.4119***(0.0388) 0.2695***(0.0248)
Average Foreign GDP 0.2551***(0.0975) -0.0147(0.0521) 0.8155***(0.0959) -0.1054(0.0741)
Average Population 3.023***(0.2517) 0.375***(0.1092) -0.2161(0.2293) 0.2367*(0.1371)
1995 Dummy -0.438***(0.1188) 0.1437***(0.0482) 0.041(0.1096) -0.0389(0.0635)
Log Likelihood -770.1116 -6230.1140 -922.6665 -5825.5810
Observations 3385 2721 3385 2406
Countries 179 176 179 171

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.

Table 6 presents our results for both export and import equations when we allow interaction between our Migrant Stock and Non-English variables. If migrants from Non-English speaking countries have a greater effect on trade than migrants from English speaking countries then we should see positive coefficient estimates on our interaction variable, Migrant Stock x Non-English. In the selection equations for both exports and imports, migrants from Non-English speaking countries increase the probability that trade will take place between New Zealand and a given country by more than migrants from English speaking countries. The effect of migrants from Non-English speaking countries in both trade equations is however less than that of migrants from English speaking countries. The overall impact on trade of English versus Non-English speaking migrants is therefore unclear. This may in large part be an artefact of the choice of our language variable which classes over 80 countries as being English speaking.

Table 7– Allowing elasticity to change with the number of migrants
Variable Exports Imports
  Selection Trade Selection Trade
Migrant Stock 0.7079***(0.0545) 0.0997***(0.0225) 0.346***(0.0533) 0.4909***(0.0296)
Square of Migrant Stock -0.0529***(0.0057) -0.0031*(0.0016) -0.0407***(0.005) -0.0344***(0.0021)
Zero Migrants 0.9479***(0.1106) -0.0903(0.0574) 0.6587***(0.1107) 0.3748***(0.0864)
Foreign GDP 0.6087***(0.0912) 0.9415***(0.0507) -0.2724***(0.0889) 1.5607***(0.0727)
New Zealand GDP 2.9717***(0.8099) 0.6856*(0.3593) 3.2462***(0.463) 1.7308***(0.2914)
World GDP 4.0465***(0.4825) 0.33(0.2168) -0.2892(0.3915) -0.447*(0.2455)
Population -3.4344***(0.2576) -0.5923***(0.1097) -0.096(0.231) -0.8456***(0.1387)
Distance -1.9193***(0.1451) -2.5103***(0.0358) -1.979***(0.1233) -1.4863***(0.0426)
Non-English -0.4712***(0.0662) 0.2702***(0.0305) 0.9189***(0.0617) -0.9885***(0.039)
Average Migrant Stock 0.016(0.035) 0.2391***(0.0169) 0.4473***(0.0388) 0.1866***(0.0243)
Average Foreign GDP 0.0914(0.0961) 0.1298**(0.0528) 0.8414***(0.0953) -0.2699***(0.0738)
Average Population 2.9869***(0.2558) 0.1868*(0.1098) -0.2208(0.2335) 0.6054***(0.1397)
1995 Dummy -0.4358***(0.1187) 0.1329***(0.0483) --- ---
Log Likelihood -768.2800 -6230.6340 -919.4301 -5823.4070
Observations 3385 2721 3385 2406
Countries 179 176 179 171

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.

We repeat our analysis excluding agriculture exports and oil imports in Appendix Table 2. The effect of excluding these goods is to increase the coefficient estimates on the interaction term in both the trade equations to the point where the coefficient estimate for imports is positive and significant. The interaction term in the selection equation for exports is however no longer significant. We also allow the effect of migrants to vary with the income of the country from which they were born in. These results are presented in Appendix Table 3 and Appendix Table 4.

In Table 7 we allow for the possibility that the effect of migrants on trade varies with the number of migrants from a given country. We do this by including the square of our Migrant Stock variable. The estimated coefficient on this variable is negative in all four equations indicating that there are decreasing returns to migrants. The effects are weaker when we exclude agricultural goods and oil from exports and imports respectively. See Appendix Table 5.

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