Re-examining the migration-trade link using province data: An application of the generalized propensity score

The migration-trade link has been studied extensively since the mid nineties, finding a positive impact through different channels. Based on the generalized propensity score (GPS) methodology, we estimate a dose-response function, depicting a non-linear impact of immigration on exports using province data for Spain and Italy. For both countries the response of province exports to more immigrants from a given nationality is always positive, although varies with the level of immigrants. First we find neither minimum threshold nor exhaustion point in the effectiveness of the immigration networks on province exports. Second we find that the value of the potential bilateral exports reaches a maximum in relatively small ethnic networks: between 70 and 100 foreign-born people of the same nationality. From a socio-economic policy perspective our results support local policies encouraging ethnic diversity in order to stimulate external trade.

► We use GPS approach to examine the causal relationship between migration and trade. ► We use data from 103 Italian provinces and 50 Spanish provinces. ► The dose-response functions show that the migration-trade link is not linear. ► Ethnic networks emerge from the first immigrants and there is no exhaustion point. ► The impact of networks on exports is at maximum for 70 immigrants of same nation.