Revisiting the Trade-Migration Nexus: Evidence from New OECD Data

SummaryInternational migrants contribute to bilateral trade creation if their presence reduces information costs or entails additional demand for goods from their source countries. Using new data on stocks of foreign-born individuals by skill class, we try to separately quantify those two channels. We assume that improved information affects host countries’ imports and exports symmetrically, while the preference channel matters for imports only. On average, for differentiated goods, both channels contribute evenly toward the total trade-creating effect of migration. In line with expectations, the relative importance of the trade cost channel is largest for homogeneous goods and for high-skilled migrants.