The link between immigration and trade in Spain

Transcription

1 1 The lnk between mmgraton and trade n Span José Vcente Blanes-Crstóbal March, 2003 Abstract Ths paper tests for the mpact of mmgraton on blateral trade usng Spansh data. It also explores some possble mechansms through whch the stock of mmgrants n a country can contrbute to s trade. It uses a gravy equaton for trade augmented wh an mmgrants stock varable and a set of control varables. We fnd that mmgraton contrbutes posvely to exports. The mpact on mports s not so clear. We also fnd evdence that s by the addonal nformaton about socal and polcal nstutons brought by mmgrants that mmgraton reduces trade transacton costs and, hence, ncrease trade. Results also show that mmgrants wh dfferent levels of educaton / sklls have dfferent effects on Spansh blateral trade. Key words: Internatonal Trade, Mgraton. JEL Classfcaton: F10, F22 Departamento de Economa y Empresa, Unversdad Pablo de Olavde, Ctra. Utrera Km. 1, Sevlla, Span. e-mal: jvblacr@dee.upo.es. Phone: Fax:

2 2 I. INTRODUCTION The ncrease n mmgrant flows and n mmgrant populaton s one of the most challengng polcal and socologcal ssues for EU countres. Immgraton has also mportant economc consequences. Although most economc studes have focused on the effects of mmgraton on host-country labour markets and s welfare state, lerature has recently begun to focus on another relevant aspect of mmgraton: the lnk between mmgrant populaton and host-country trade. Ths paper s an attempt to ncrease the - stll scarce - emprcal evdence about ths subject by analysng the Spansh case. Immgraton can nfluence trade flows through two basc channels: frst, mmgrant brng wh them a preference for home-country products and, second, mmgraton can reduce tradng transacton costs. Ths second channel s twofold: mmgraton can create networks - knowledge of home-country markets and busness contacts and cultural tes as common languages, hstorcal colonal tes, common preferences, knowledge of polcal and socal nstutons can reduce tradng transacton costs. The exstng lerature suggests that the relevance of these channels would be dfferent for dfferent types of products and for dfferent types of mmgrants / source-countres. Those dfferences can allow us to dentfy the mechansms behnd the lnk between mmgraton and trade. Immgraton s a recent phenomenon n Span but has ncreased very fast n recent years. Immgrant populaton n Span represents about 2.5% of total populaton n 2000 when was less than 1% only ten years before, and s ncreasng quckly. Moreover, s partcular geographcal dstrbuton of source-countres can be useful to dstngush the dfferent role of each of the types of lnks between mmgraton and trade mentoned above. So we thng that the case of Span can be useful to help n understandng the relatonshp between mmgraton and trade. The paper uses blateral Spansh trade data wh 40 partner countres from 1991 to The emprcal model s an augmented gravy equaton, whch ncludes mmgraton stock data. In order to dentfy the mechansm behnd the lnkage between

3 3 mmgraton and trade, and not only the exstence of an effect, trade data s classfed by dfferent partner countres mmgraton source-countres accordng to the smlary of socal and polcal nstutons and the educaton / skll level of mmgrants. The followng secton dscuss how mmgrant populaton can nfluence trade of the host-country (the lnks between mmgraton and trade and the mechansms explanng that lnk). Secton three presents the gravy equaton, the hypothess to be tested and the emprcal model mplemented n ths paper. Next secton presents the econometrc results and, fnally, secton fve summarze the man concluson of the paper and proposals of further research.

4 4 II. THE LINKS BETWEEN IMMIGRATION AND TRADE Theoretcal lerature about the effects of mmgraton on trade s scarce. The most relevant excepton s the work of Rauch (1999). Rauch argues that mmgrants can reduced trade transacton costs by creatng socal networks wh ther countrymen at home-country whch can faclate trade between home and host-country. Socal networks wll help to match nternatonal buyers and sellers and, hence, reduce transacton costs of trade. Ths effect wll be greater for dfferentated products than for products traded on organzed exchanges (usually, homogeneous products). Ths s one of the hypothess that the exstng emprcal lerature has tested. All those papers have n common that they make use of an augmented gravy equaton for trade. So, recent work of Gould (1994), Head and Res (1998), Dunlevy and Hutchnson (1999) and Grma and Yu (2002) has found emprcal evdence for a posve effect of mmgraton on blateral trade between mmgrants host and home-country. From those papers, we can dentfy two channels through whch mmgrant populaton can benef blateral trade between ther home and host countres. We can also dentfy a set of mechansm through whch these channels act. There s too one channel through whch mmgraton can reduce such trade. Immgraton can posvely nfluence trade flows through two basc channels: frst, mmgrant brng wh them a preference for home-country products and, second, mmgraton can reduce tradng transacton costs. Ths second channel s twofold. In one hand, mmgraton can create (ethnc) networks - knowledge of home-country markets and busness contacts. Immgrants can have an advantage n dealng wh ther countrymen who reman at the home-country due to ssues of trust or of mutually understood culture 1. In the other hand, cultural tes, as common languages, hstorcal colonal tes, common preferences, knowledge of polcal and socal nstutons, can reduce tradng transacton costs. 1 The relevance of networks n reducng trade transacton cost and the posve role than mmgrants can play n creatng these networks has been recently formalzed by Rauch (1999) and surveyng by Rauch (2001).

5 5 The exstng lerature suggests that the relevance of these two channels would be dfferent for dfferent types of trade flows. The effects of the second channel would also dffers dependng on, frst, the type of products traded, second, the home-country of the mmgrants and, fnally, personal characterstcs of the mmgrants, as level of educaton or hs/her job or busness actvy developed n the host-country. Those dfferences can help us to dentfy the mechansm through whch ths lnk between mmgraton and trade acts. In that way, whle reducton of transacton trade costs would affect n a smlar way to both mports and exports, mmgrant preference for home-country products would affect only mports of host-country from the home-countres. So, f we only fnd a posve effect of mmgraton on mports but not n exports, could be sad that mmgraton affects trade through mmgrants preference for home-country products. If the effect of mmgraton s greater for mports than for exports, ths mechansm would account for the dfference. Moreover, ths effect s lkely to be larger for dfferentated products than for homogeneous products, as ponted by Head and Res (1998). When goods are homogeneous there s ltle reason to prefer goods sourced from a specfc country whle when goods are dfferentated the deal varety may be unavalable locally and requre mportaton. Wh respect to transacton costs reducton, frstly, the addonal nformaton brought by mmgrants can be more relevant for consumer goods than for producer goods, as Gould (1994) ponted out, snce the former tend to be more dfferentated products across countres. Moreover, Dunlevy and Hutchnson (1999), argue that trade of consumer goods and processed foodstuffs would have stronger mmgrant effects than crude or sem-manufactured goods, to the extent that they are mported to satsfy specfc tastes. So, f a stronger posve effect of mmgrants stock s founded for consumer goods than for producer goods, could be deduced that the mechansm behnd the mmgraton-trade lnk s nformaton ncrease about foregn products ganed through mmgrants. Secondly, the dfferent geographcal source of mmgrants can be also useful. Some home-countres have more smlar socal and polcal nstutons to the ones n

6 6 the host-country. Ths could be the case of countres wh colonal / cultural tes or because they are nvolved n the same economc ntegraton agenda, sharng common nstutons. In that case, mmgrants from these countres would brng wh them less addonal nformaton than mmgrants from other countres and they would contrbute less to reduce transacton costs. That s, for ths mechansm, the effect of mmgraton on blateral trade would depend on whch country that mmgrant comes from. In the other hand, mmgrants can reduce transacton costs also through ndvdual mmgrant personal contacts or connectons wh hs home-country. Ths effect s ndependent of the country of orgn of the mmgrant 2. So, f we fnd a posve effect of mmgraton on trade wh countres whch present dfferent socal and polcal nstutons but not wh countres wh smlar ones, then the mechansm through whch mmgratons ncreases trade s the addonal knowledge about these nstutons brought by mmgrants. If the posve effect s bgger for trade wh the former group of countres than wh the later, ths mechansm would account for the dfference. If there s no dfference between the two groups of mmgrants, personal contacts or connectons wh mmgrant s home-country would explan the mmgraton-trade lnk. Fnally, dfferent personal characterstcs of mmgrants can result n dfferent effects of mmgraton on trade. Gould (1994) and Head and Res (1998) argue that the more sklled the mmgrants are, the greater the chance that they wll possess the knowledge and contacts to ncrease trade flows. So, If the lnk works through mmgrants knowledge about busness n ther home countres or by contacts wh home-country resdents, the effect of mmgraton would be greater as the more sklled (educated) the mmgrants are (or as the more they are related to busness actves). There could be, however, a negatve effect of mmgraton on blateral trade. Dunlevy and Hutchnson (1999) ponted out a trade-substuton mmgraton effect. Immgrants can apply ther knowledge about technology or producton methods and about mmgrants tastes to host-country producton or transm them to local producers n a way that prevously mported goods could be substuted by local producton. 2 These two mechansm are called non-ndvdual specfc and ndvdual specfc, respectvely, by Grma and Yu (2002). In the former case, the effect of the mmgrant-lnk would be unversal and, n the later, non-unversal.

7 7 III. THE EMPIRICAL MODEL In ths paper we test frst for the exstence and relevance of a posve effect of mmgrants n Span on s blateral trade wh ther home countres. Then, we try to dentfy some of the mechansms through whch ths posve effect occurs. More precsely, we use nformaton about dfferent home-country of mmgrants to test for the smlary of socal and polcal nstutons and for the dfferent mmgrants skll levels mechansms. Followng the prevous lerature, we use an augmented gravy equaton for trade to test the lnk between mmgraton and blateral trade. The basc gravy equaton for trade relates posvely the volume of trade to the mass of the two countres and negatvely to the trade costs between them. We use the sum of Span and partner GDP n year t relatve to World GDP n the same year to measure the sze of the two countres (rgdp ): rgdp GDP + GDP = GDP World, t span, t Dstance (dst ), whch proxes trade costs between countres, s measured by the geographcal dstance, n klometres, between the capal of Span and the capal of the partner country (PCGLOBE ). The model also ncludes an ndex of the economc remoteness of alternatve markets or thrd country optons : rem = j, Span dst j GDP j for each year t. The more remote are the alternatve markets (the less attractve are the thrd country optons ) for the tradng partner, the more the latter s expected to trade wh Span.

8 8 Addonally to ths basc specfcaton, we nclude a measure of the stock of mmgrants from country n Span n year t (mg ), that we expect two affect posvely both Spansh mports from and exports to mmgrants home-countres, because the reasons explaned n the prevous secton of ths paper 3. We also nclude a set of control varables n the form of dummes varables to capture partcular characterstcs of partner countres whch can ncrease trade flows. Those varables are, frst, a dummy varable for membershp of the European Unon (EU ), because the Sngle European Market faclates trade between s members. Second, a dummy varable for capturng the fact of sharng a fronter wh Span, snce a common fronter can ncrease trade between countres (frt ). Sharng a common language would also faclates trade, ndependently of the mmgraton effect, snce reduces transacton costs (lang ). We use data of Span and 40 partner countres for the perod from 1991 to Although we have a panel of data, we do not nclude country fxed effects on the model, snce would, frst drop some relevant varables that do not vary along tme as dstance, common fronter and common language and, second, skp all the between varaton of the model, when we are gong to use dfferences between source countres to dentfy the mechansm behnd the lnk between mmgraton and trade. We do control for tme effects by ncludng a tme dummy varable (year t ). So, we frst estmate the followng specfcaton: (specfcaton 1) y + = β + β mg 1998 β t= , t 1 year t + µ + β rgdp 2 + β dst 3 + β rem 4 + β lang 5 + β frt 6 + β EU 7 + where y stands for eher Spansh mports (m ) from or exports (x ) to mmgrants home-country, 3 One excepton s the mport-substuton effect.

9 9 µ s the..d. error term, and all varables, except from dummy varables, are n natural logarhms. We perform two addonal tests to dentfy some of the mechansms explanng the lnk between mmgraton and trade. To capture dfferent characterstcs of mmgrants n Span these tests use nformaton on mgrants home-country. We defne dummy varables for those countres whch present the relevant characterstc and for those whch do not (.e., two dummes for each characterstc). Then a multplcatve varable of these dummes and mg s ncluded n the model nstead of the mmgrant s stock varable. Ths allows for the elastcy of mmgraton to vary across the dfferent groups of countres 4. The frst of the two addonal tests, consder the hypothess of a lower posve effect of mmgrants from home-countres wh more smlar socal and polcal nstutons to the ones n the host-country, snce they brng wh them less addonal nformaton. The test s twofold. Frst, we consder that mmgrants comng from former Spansh colones wll benef less blateral trade 5. We answer, so, to the call of Grma and Yu (2002) who test ths hypothess for mmgrants from Commonwealth and non- Commonwealth countres to the UK and express the am of extendng ther job to other European countres wh smlar colonal past. We defne a dummy varable whch takes the value 1 for countres that were colones of Span a 0 f they were not (col ) and a dummy varable whch takes the value 1 for countres that were not colones of Span a 0 f they were (ncol ) So, we estmate the followng specfcaton: (specfcaton 2) y = β + β mgcol + β col β t= , t year + β mgnocol + β rgdp t 2 + µ 3 + β dst 4 + β rem 5 + β frt 6 + β EU 7 + Wh respect to specfcaton 1, we drop the common language varable, due to s hgh level of correlaton wh the former Spansh colones varable (see foot note 5). 4 Ths s the methodology used by Grma and Yu (2002). 5 For example, language s already known snce s the same n Span than n s former colones (Phlppnes beng the only excepton n the sample)

10 10 However, although Span could be consdered the country wh the most smlar colonal past to UK, there are also bg dfferences between both cases. For example, the process of decolonzaton s hardly earler n the case of Span and there s not any organzaton lke the Commonwealth between Span and s former colones. Moreover, Span, specally n the last decades, has approached more to Europe, beng a member of the EU and, hence, sharng, common polcal and economcal nstutons. So, we consder that EU mmgrants n Span can brng wh them less addonal nformaton and we test ths hypothess dstngushng EU and non EU mmgrants. (specfcaton 3) y = β + β mgeu + β frt β EU β mgnoeu 1998 β t= , t year t + µ + β rgdp 3 + β dst 4 + β rem 5 + β lang 6 + The second of the two addonal tests, explores the hypothess of a bgger posve effect on trade of more sklled / educated mmgrants, snce they are more able to brng and use nformaton about home markets and home socal and polcal nstutons. Snce we do not have statstcal nformaton about mmgrants skll levels, s reasonable to assume that skll levels of mmgrants s hghly correlated wh ther home-country and that mmgrants from OECD countres wll be more sklled than the ones from non-oecd countres. It s also emprcal (aggregate) evdence on the fact that non-oecd mmgrants develop n Span less sklled jobs that OECD mmgrants. (specfcaton 4) y = β + β mgoecd + β frt β EU 8 + β mgnooecd + β oecd β 10, t t= β rgdp year t 3 + µ + β dst 4 + β rem 5 + β lang 6 + Followng prevous studes usng gravy models (as Gould, 1994 and Grma and Yu, 2002 ) we also estmate a dynamc verson of the above specfcatons ncludng

11 11 lagged mports and exports. Ths would account for some form of momentun n tradng (such as producton and delvery lags) and would help to control from some nonstatonary n our model (even we presume ths not to be a problem on our sample because s only nne perods long). Anyway, the estmaton of the dynamc specfcatons wll serve to check the robustness of our results. In the next secton we present an dscuss the estmaton results.

12 12 IV. RESULTS Testng for the mpact of mmgraton stock on Spansh blateral trade, we fnd dverse results for exports and mports (Table 1). There s a clear posve effect on Spansh exports. A 10% ncrease n mmgrants stocks would ncrease exports n a 1.4%. Ths posve effect holds on the dynamc specfcaton but the mpact s lower (0.7%). In the case of mports, however, there s not any effect from mmgraton. One possble explanaton could be that the mports-substuton effect outweghes the transacton cost reducton and preference for home-country products posve effects. If ths was the reason, we should fnd an ncrease n Spansh producton of foregner 6 goods. Although we do not have data about ths knd of actvy, do not seems to be a good explanaton snce mmgraton n Span s a recent phenomenon and, probably, the stock of mmgrants s not hgh enough to economcally justfy ths knd of busness. Another explanaton could be the dfferent good composon of exports and mports. Non-consumer goods, specally raw materals as ol, are more relevant n Spansh mports than n exports. The posve effect of mmgraton on trade would be lower for ths knd of goods than for consumer goods, accordng to the lerature dscussed n the second secton. As an example, Gould (1994) found evdence about a stronger effect of mmgraton on consumer goods US mports than n producer goods, whch, n fact, was non sgnfcant. However, n the dynamc specfcaton, mmgrants n Span have a posve effect on s mports, although the level of sgnfcance s only a 10 % and the mpact s lower than for exports. The rest of varables all have the expected sgn, apart from common fronter (frt), whch s not sgnfcant for mports, and remoteness (rem), non sgnfcant eher for mports not for exports (although ths varable has the expected posve effect on exports when stmatng the dynamc specfcaton). So, the economc mass of Span and each of s partner countres ncrease blateral trade, as well as the fact of beng a member of the European Unon and sharng a common language. Dstance between Span an s trade partners, as a proxy of trade costs, decreases trade flows. 6 Typcal goods from mmgrants home-countres.

13 13 In table 2 we show the estmaton results for the hypothess that mmgrants from non-former Spansh colones wll benef more trade, snce they brng wh them more addonal nformatonal and, hence, contrbute more to reduce transacton costs. Results show a posve effects of mmgrants from non-former Spansh colones n both, Spansh blateral exports and mports, f we llok at the results from the dynamc specfcaton (non sgnfcant for mports n the statc specfcaton). By contrast, we do not fnd a posve effect between mmgrants from former Spansh colones and trade. The effect s even negatve for both exports and mports or only mports, dependng on the dynamc or statc specfcaton results. However, the fact of beng a former Spansh colony have now a posve effect n both exports and mports. That s, controllng for all the trade advantages of beng a former colony, mmgrants from those countres do not have a posve effect on blateral Spansh trade. Immgrants from non-former colones seem to brng to Span the nformaton about socal nstutons that s already known about former colones. So, as Grma and Yu (2002) for the UK, we fnd evdence for the hypothess that mmgraton reduces trade transacton costs because mmgrants ncrease the host-country knowledge about socal nstutons n home countres. However, the second test we have performed to test for that hypothess, that s, usng EU membershp as a proxy for smlar socal nstutons, do not offers results whch confrm our hypothess (Table 3). Immgrants from EU countres do not have a clear lower effect on Spansh blateral exports than mmgrants from non-eu countres. The dfference s only a 0.04% or a 0.4% (statc or dynamc model) lower ncrease n exports for a 10% ncrease n mmgraton stock. So, seems that personal contacts or connectons wh mmgrants home country would explan the effet of mmgraton n Spansh blateral exports. For Spansh blateral mports, the effect for EU mmgrants s even greater than for non-eu mmgrants. An explanaton could be than EU mmgrants have a stronger preference for home-country products than non-eu mmgrants and / or s easer for them to get those products because they suffer from lower trade costs and apart from other OECD mmgrants have hgher ncome level. We fnally test for the hypothess that more sklled mmgrants wll contrbute more than less sklled mmgrants to trade transacton costs reducton and, hence, to ncrease blateral trade. We assume that mmgrants from OECD countres are more

14 14 sklled than mmgrants from non-oecd countres. Table 4 shows dverse results for exports and mports equatons. Both knds of mmgrants consdered contrbute n a smlar percentage to Spansh blateral exports, although s slghtly hgher for non- OECD / OECD mmgrants (a 0.5% / 0.02% hgher ncrease n exports for a 10% ncrease n mmgrants stock n the statc / dynamc specfcaton). By the contrary, mmgrants from OECD countres contrbute more to ncrease Spansh mports than non-oecd mmgrants. A 10% ncrease n the former ncrease mports between a 1.6% and a 1.2% (statc or dynamc model) whle there s non statstcally sgnfcant effect on mports for non-oecd mmgrants. Maybe OECD mmgrants are more nvolved n mport busness than non-oecd mmgrants or, as n the case of EU mmgrants, they present a hgher preference for home-country products or / and a hgher capably for access to such products.

15 15 Table 1: Impact of mmgraton n Spansh blateral trade (Specfcaton 1) Statc Specfcaton Dynamc Specfcaton Exports Imports Exports Imports Exports / Imports t *** (18.42) 0.76*** (13.28) mg 0.14*** (3.82) (-1.01) 0.07*** (3.33) 0.05* (1.80 rgdp 0.78*** (32.43) 0.98*** (22.41) 0.18*** (4.89) 0.20*** (3.71) dst -0.97*** (-14.83) -1.13*** (-12.47) -0.35*** (-5.56) -0.38*** (-4.46) rem (-1.19) 0.03 (0.12) 0.19** (2.08) 0.20 (1.37) lang 1.50*** (13.87) 1.43*** (6.50) 0.38*** (3.71) 0.17* (1.87) frt 0.42*** (6.59) (-1.20) 0.09* (1.91) -0.16** (-2.24) EU 0.99*** (12.99) 1.08*** (9.95) 0.20*** (3.30) 0.14 (1.55) constant 6.56*** (6.13) 7.54*** (8.06) 3.82*** (4.64) 3.51*** (2.75) R Obs OLS estmatons ncludng tme dummes varables. ***, **, *, ndcates sgnfcance at the 1%, 5% and 10% level respectvely. t-ratos, based on heteroscedastcy robust standard errors, are gven n parentheses.

16 16 Table 2: Impact of mmgraton n Spansh blateral trade by partner colonal status. (Specfcaton 2) Statc Specfcaton Dynamc Specfcaton Exports Imports Exports Imports Exports / Imports t *** (19.69) 0.73*** (13.26) mgcol -0.17* (-2.07) -0.95*** (-5.29) (-0.35) -0.22*** (-3.27) mgnocol 0.15*** (3.14) 0.07 (1.28) 0.08*** (3.27) 0.11*** (2.74) col 4.32*** (5.53) 10.18*** (6.11) 1.23** (2.42) 2.99*** (4.30) rgdp 0.82*** (26.02) 0.99*** (17.58) 0.17*** (4.32) 0.22*** (3.91) dst -1.00*** (-13.29) -1.09*** (-10.96) -0.33*** (-5.22) -0.37*** (-4.43) rem -0.34** (-2.38) 0.02 (0.08) 0.18* (1.76) 0.27* (1.83) frt 0.33*** (4.41) -0.27** (-2.21) 0.07 (1.35) -0.18** (-2.19) EU 0.95*** (12.38) 1.00*** (9.93) 0.18*** (2.86) 0.16* (1.83) Constant 5.24*** (4.60) 5.93*** (4.14) 3.48*** (4.18) 3.42*** (2.82) R Obs OLS estmatons ncludng tme dummes varables. ***, **, *, ndcates sgnfcance at the 1%, 5% and 10% level respectvely. t-ratos, based on heteroscedastcy robust standard errors, are gven n parentheses.

17 17 Table 3: Impact of mmgraton n Spansh blateral trade by partner EU membershp. (Specfcaton 3) Statc Specfcaton Dynamc Specfcaton Exports Imports Exports Imports Exports / Imports t *** (18.46) 0.76*** (12.67) mgeu 0.141*** (3.70) 0.12* (1.70) 0.05** (2.10) 0.04 (0.92) mgnoeu 0.145*** (2.82) -0.16** (-2.55) 0.09*** (3.17) 0.06 (1.57) rgdp 0.78*** (32.01) 0.96*** (20.71) 0.18*** (4.91) 0.20*** (3.66) dst -0.98*** (-14.95) -1.12*** (-11.99) -0.35*** (-5.56) -0.38*** (-4.44) rem (-1.18) 0.11 (0.49) 0.18** (1.98) 0.19 (1.34) lang 1.50*** (13.85) 1.42*** (6.50) 0.37*** (3.70) 0.16* (1.86) frt 0.43*** (5.98) -0.33*** (-2.66) 0.12*** (2.60) -0.15** (-2.11) EU 1.03* (1.92) -1.35* (-1.68) 0.52** (1.92) 0.33 (0.72) Constant 6.54*** (5.46) 8.85*** (6.13) 3.64*** (4.31) 3.39** (2.52) R Obs OLS estmatons ncludng tme dummes varables. ***, **, *, ndcates sgnfcance at the 1%, 5% and 10% level respectvely. t-ratos, based on heteroscedastcy robust standard errors, are gven n parentheses.

18 18 Table 4: Impact of mmgraton n Spansh blateral trade by mmgrants skll level. (Specfcaton 4) Statc Specfcaton Dynamc Specfcaton Exports Imports Exports / Imports t *** (15.47) 0.73*** (11.78) mgoecd 0.20*** (5.34) 0.16** (2.25) 0.11*** (3.73) 0.12** (2.49) mgnooecd 0.25*** (4.96) (-0.94) 0.09*** (2.94) 0.02 (0.67) oecd 1.29*** (2.75) (-1.11) (-0.05) (-1.26) rgdp 0.72*** (26.47) 0.89*** (16.85) 0.20*** (5.30) 0.21*** (3.91) dst -0.85*** (-14.06) -0.96*** (-9.67) -0.36*** (-5.93) -0.37*** (-4.71) rem -0.27*** (-2.61) (-0.44) 0.14 (1.61) 0.17 (1.24) lang 1.54*** (13.49) 1.48*** (6.61) 0.46*** (4.16) 0.22** (2.48) frt 0.44*** (6.50) -0.28** (-2.30) 0.09* (1.91) -0.23*** (-2.88) EU 0.49*** (6.35) 0.40*** (3.22) 0.11 (1.54) 0.01 (1.14) Constant 4.81*** (4.91) 6.76*** (5.11) 3.74*** (4.63) 3.72*** (2.81) R Obs OLS estmatons ncludng tme dummes varables. ***, **, *, ndcates sgnfcance at the 1%, 5% and 10% level respectvely. t-ratos, based on heteroscedastcy robust standard errors, are gven n parentheses.

19 19 V. CONCLUDING REMARKS In ths paper we have tested for the exstence of a lnk between mmgraton and blateral trade usng data for the Spansh economy. We have use a gravy equaton for trade augmented wh an mmgrants stock varable and some other control varables. Both a statc and a dynamc verson of the emprcal model have been stmated, n order to test the robustness of the results. We have also explore some possble mechansms through whch the stock of mmgrants n a country can contrbute to s trade. The methodology used has been to allow the mmgrants varable coeffcent to vary for dfferent types of mmgrants, accordng to ther home-country. Those dfferent types of mmgrants present partcular characterstcs whch can contrbute n a dfferent way to the volume of blateral trade. Immgraton have a clear posve effect on Spansh exports. A 10% ncrease on mmgrants stock contrbute to a 1.4% ncrease on Spansh exports. Ths sgnfcant and posve effect s robust to the dfferent specfcatons estmated n ths paper, the only excepton beng mmgrants from former Spansh colones - once we control for the fact of have been a colony and for bothm the statc and the dynamc model. Results are not so clear for the mpact of mmgraton n Spansh mports. So, when we estmate for all types of mmgrants together, there s not a clear sgnfcant mpact of ths varables on mports. One explanaton could be that the mport substuton effect due to mmgraton equals the trade transacton cost reducton effect. Two other, more lkely, explanatons whch can contrbute to ths results are, frst, that product composon of Spansh mports and exports dffers. The relevance of raw materals, specally ol, s greater n mports than n exports. If we accept, accordng to the lerature, that the effect of mmgraton on trade wll be greater for consumer / or dfferentated products than for other knds of products, we should expect a bgger effect of mmgraton on Spansh exports than n s mports. Second, the effect can dffer accordng to dfferent mmgrants characterstcs, as home-country. We have, then, test for some mechansm explanng the lnk between mmgraton and trade. Assumng that socal and polcal nstutons n Span are more smlar to s former colones than to other countres, we fnd evdence for the

20 20 hypothess that mmgraton stmulates trade because reduces trade transacton costs by ncreasng the knowledge about socal and polcal nstutons. However, ths result s not robust to an other specfcaton whch consder that EU member countres are the ones wh the socal and polcal nstutons the more smlar to the ones n Span. Even, mmgrants from EU countres have a bgger mpact on Spansh mports than other mmgrants. Maybe, socal and cultural dfferences between Spansh and other EU czens are stll hgher than the ones between Span and s former colones and EU mmgraton s contrbutng to ncrease recprocal knowledge. Or may be that EU mmgrants have a stronger preference for home-country products and they have a hgher capably to consume them n Span. Ths last explanaton s reasonable f we consder that a relevant share of EU mmgrants n Span are retred people. Fnally, we have explore f the level of educaton / sklls of mmgrants s posvely related wh the level of trade, snce those mmgrants would contrbute more than less sklled mmgrants to trade transacton costs reducton. Informaton about educaton level s not avalable for ndvdual mmgrants n Span for the sample consdered here, so we have proxed ths varable assumng that mmgrants from OECD countres present a hgher level of educaton / sklls than other mmgrants. Results for ths test show that both knds of mmgrants contrbute n a smlar percentage to Spansh blateral exports. By the contrary, mmgrants from OECD countres contrbute more to ncrease Spansh mports than non-oecd mmgrants. So, we have found partal evdence about ths last hypothess. Ths paper, to our knowledge, s the frst attempt to analyss the mpact of mmgraton on Spansh trade. However, s stll n a prelmnary stage and more work needs to be made. Two possble extensons are, frst, to make use of trade product composon, snce the exstng lerature predcts a dfferent effect of mmgraton on trade for dfferent types of goods. Ths would also help to explan the weak robustness of our results for mports equaton. Second, could be also useful to make use of nformaton about ndvdual mmgrants characterstcs, nstead of proxy them by ther home-country, even f wll reduce the perod sample.

21 21 REFERENCES Dunlevy, J. and Hutchnson, W. (1999): The mpact of mmgraton on Amercan mport trade n the late nneteenth and twenteth centures, Journal of Economc Hstory, 59, pp Grma, S. and Yu, Z (2002): The lnk between mmgraton and trade: Evdence from the UK, Weltwrtschaftlches Archv, 138, pp. Gould, D. (1994): Immgrant lnks to the home-country: emprcal mplcatons for U.S. blateral trade flows, The Revew of Economcs and Statstcs, 76, pp Head, K. and Res, J. (1998): Immgraton and trade creaton: Econometrc evdence from Canada, Canadan Journal of Economcs, 31, pp Rauch, J. (1999): Networks versus markets n nternatonal trade, Journal of Internatonal Economcs, 48, pp Rauch, J. (2001): Busness and socal networks n nternatonal trade, Journal of Economc Lerature, 39, pp