Abstract
The paper investigates the effect that subnational networks of immigrants and emigrants had on exports from Spanish provinces (NUTS3) over the period of 2007–2016 by integrating state-of-the-art advances in the gravity model literature. In particular, it allows for heterogeneity in provincial export capacity, which significantly reduces pro-export effects, and select the Poisson Pseudo-Maximum Likelihood as the most suitable estimator according to diagnostic tests. When both immigration and emigration are instrumented, the pro-export effect of immigrants found by previous studies vanishes and that of emigrants, instead, appears appreciable. The results obtained suggest that over the period that encompasses the double-deep crisis, immigrants did not show significant information and enforcement effects in the considered context, while the effects of emigrant demand for home-country goods may have been important. The prevalence of emigrant over immigrant effects appears attributable to a change in the composition of the migration stocks over the considered period of crisis.
Highlights
Before the sudden halt brought about by the outbreak of the COVID-19 pandemic in the early 2020, migration flows towards OECD countries and across the world witnessed a persistent upsurge (OECD 2020b, https://www.migrationdataportal.org).1 3 Vol.:(0123456789)A
17 In this application, we will not implement the standard error correction for shift-share instruments proposed by Adao et al (2019) or the related approach by Borusyak et al (2018). These techniques do not allow us to include two instrumental variables based on different shares and would not allow us to compare the effects of immigration with those of emigration
Before taking these results as conclusive, three further steps are required to ensure that our estimates are reliable: i) ensuring that the estimates are robust to the bias-corrected method proposed by Weidner and Zylkin (2020); ii) addressing possible remaining sources of endogeneity; iii) and studying whether there is significant heterogeneity in the migrant effects, which could challenge the underlying assumption of constant elasticity in the Poisson Pseudo Maximum Likelihood (PML) model (Head and Mayer 2014)
Summary
Before the sudden halt brought about by the outbreak of the COVID-19 pandemic in the early 2020, migration flows towards OECD countries and across the world witnessed a persistent upsurge (OECD 2020b, https://www.migrationdataportal.org). Results appear sensitive to the adopted empirical approaches—e.g., countries vs subnational units of analysis, immigrants vs emigrants, imports vs exports, standard vs differentiated commodities, similar vs dissimilar countries)—uncovering the nuances of a still-open research issue This is so when we address the persistence of migration effects on trade during downturns in the business cycle, which has received little attention so far. When implemented at the subnational level, analyses have generally assumed that the trade capacities of the recipient units of investigation (i.e., regions) are homogeneous Both choices entail problematic implications that we address by integrating the role of emigrants along with that of immigrants and by allowing for export capacities to be heterogeneous across subnational units of analysis
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