The Migration-Trade Nexus in the Presence of Vertical and Horizontal Product Differentiation

This paper provides an exploration of the migration-trade nexus in the case of Italy over the period 2005-2010 by crossing the two dimensions of migration (immigration and emigration) and the two dimensions of intra-industry trade (vertical and horizontal). This empirical strategy turns out to be useful to improve interpretation of econometric results. In general, we find that both immigration and emigration are positively and significantly related to intra-industry trade. However, the magnitude and the statistical significance of migration’s impact on trade vary, depending on the type of trade flows considered (vertical or horizontal), the direction of migration (immigration or emigration) and the partner countries considered (OECD or non-OECD). In particular, we find that immigrants from non-OECD countries have a positive and significant impact both on “variety trade” and “quality trade”, immigrants from OECD countries affect significantly only “variety trade” and emigrants to non-OECD enhance only “variety trade” too. These results are largely consistent with predictions deriving from theoretical models of IIT and from the literature on migration-trade nexus