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Analyzing the Immigration-Induced Changes in Product Diversity and Trade Patterns: The Case of the EU-Mediterranean-Eastern Europe Zone

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Book cover The Socio-Economic Impact of Migration Flows

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Abstract

This chapter analyses the impacts of migration on international trade and product diversity. While Mediterranean Partners and Eastern European Countries constitute the home, the EU 27 constitutes the host countries. Trade analyses cover both total and industry-level bilateral exports and imports, and product diversity is measured by focusing both on industry-level employment and number of enterprises. The institutional framework that governs and facilitates the factor movement and trade of goods between the EU and home countries are also assessed. Almost in all cases migration is found to have a significant impact on both exports and imports. This outcome supports and accepts the “information bridge hypothesis” which boosts trade via lowering transaction costs. Empirical evidence also shows that migration do affect product diversity in some industries which justifies the existence of “transplanted home bias” that boosts imports from the home countries and motivates production in some industries at host countries.

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Notes

  1. 1.

    The FEMISE Research Report, FEM32-06, for example, concludes that migration flows are to be a key determinant of the demographic evolution in the next decades, and such flows will originate in the South.

  2. 2.

    There are other approaches as well, which present alternative explanations as to why people migrate, and which are, by and large, variants of these two approaches. For a discussion of different migration approaches, see Stark (1984), Stark and Bloom (1985), Katz and Stark (1986), Massey (1990), Stark (1993), and Massey et al. (1993, 1994).

  3. 3.

    Growth in both trade and migration in recent decades suggests that the traditional theory of trade probably cannot accurately capture the complete relationship between migration and trade (Lewer and Van den Berg 2009). In particular, conventional neoclassical trade theory (e.g., Heckscher-Ohlin) predicts that migration and trade are substitutes, which seems to contradict the empirical evidence suggesting complementarities between migration and trade dominate (see Sect. 3, and also see Nana and Poot 1996; Gaston and Nelson 2011; Bowen and Pédussel-Wu 2011).

  4. 4.

    This is true especially in countries where social security is inadequate, where capital markets are not well functioning, or where markets for capital and insurance are non-existent or inaccessible, leading households to use migration as a strategy to overcome capital constraints and diversify economic risks (Stark 1984; Stark and Bloom 1985; Katz and Stark 1986).

  5. 5.

    Some €7.1 billion is officially transferred each year from Europe to eight Mediterranean countries (between €12 and €14 billion including informal transfers). These remittances from Europe therefore far exceed total flows of net foreign direct investment (US$6.4 billion a year, 2000–2003) and official development assistance (US$4.3 billion a year, 2000–2003) received by these countries; see EIB: http://www.eib.org/publications.

  6. 6.

    For a review of the literature on the economics of migration and remittances, see Koska et al. (2013).

  7. 7.

    Irrespective of the level of education, the unemployment rates of foreign-born persons were systematically higher than for native-born persons, and especially in 2008, this was true in almost all Member States for which data were available (EUROSTAT 2011: 41).

  8. 8.

    There are some important factors contributing to immigrants’ such employment experiences, such as the non-recognition of migrants’ qualifications and skills which are earned abroad, language barriers, or discrimination; see EUROSTAT (2011) and EMPL (2011) for details.

  9. 9.

    See Hanson (2009) for discussions of this literature.

  10. 10.

    A survey of the main findings of such studies can be found in UNECE (2002), the United Nations Economic Commission for Europe.

  11. 11.

    According to the European Commission (EC) publication, SEC (2006), in Italy, there are some 168,000 such enterprises. In Belgium, in the Brussels area alone, self-employed persons originating from ethnic minority communities are estimated at around 18,000, while for the Flemish region, the number is estimated at about 10,000. In Germany, in 2003, there were 142,000 self-employed non-EU citizens, and in Netherlands, in 2004, 58,000 ethnic entrepreneurs were recorded (p.17).

  12. 12.

    Among different motives, immigrant entrepreneurship is a way to circumvent unemployment, especially given their difficulties in finding paid-employment via formal routes; see e.g., van Delft et al. (2000), Constant et al. (2005), EMN (2005) and OECD (2007).

  13. 13.

    See Wagner et al. (2002), Peri and Requena-Silvente (2010), and Gaston and Nelson (2011), and references therein, for surveys and discussions of the main findings of this literature.

  14. 14.

    The FEMISE Research Report (2007–2008) written by Lorca and De Arce gives more detailed background information on immigration policies of the EU until 2008.

  15. 15.

    REN is used as a proxy to represent costs in that particular establishment (Dinlersöz 2004).

  16. 16.

    Note that the sum of EE/Pop, MPC/Pop and NAV/Pop does not add up to 1 as there are other migrants originating from countries other than EECs and MPCs.

  17. 17.

    Full estimation results for the static total exports and imports, for the static industry-level exports and imports, for the dynamic total exports and imports, and for the static number of enterprise and employment equations are available upon request.

  18. 18.

    Their coefficients are not reported in these summary tables, but are available upon request.

  19. 19.

    Results are available upon request.

  20. 20.

    Results are available upon request.

  21. 21.

    Due to poor statistical significance, we exclude from the Tables the estimation results as regards the change in the number of enterprises.

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Authors and Affiliations

  1. Akdeniz University, Antalya, Turkey

    Selim Çağatay

  2. Mersin University, Mersin, Turkey

    Süleyman Değirmen

  3. University of Otago, Dunedin, New Zealand

    Murat Genç

  4. University of Tübingen, Tübingen, Germany

    Onur A. Koska

  5. University of Hamburg, Hamburg, Germany

    Bernd Lucke

  6. University of Mannheim, Mannheim, Germany

    Perihan Ö. Saygın

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  1. Selim Çağatay
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  2. Süleyman Değirmen
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  4. Onur A. Koska
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Correspondence to Selim Çağatay .

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Editors and Affiliations

  1. Dept. of Economics, Technical University of Cartagena, Cartagena, Spain

    Andrés Artal-Tur

  2. Dept. of Economics, University of California at Davis, Davis, California, USA

    Giovanni Peri

  3. Dept. of Economics, University of Sheffield, Sheffield, United Kingdom

    Francisco Requena-Silvente

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Çağatay, S., Değirmen, S., Genç, M., Koska, O.A., Lucke, B., Saygın, P.Ö. (2014). Analyzing the Immigration-Induced Changes in Product Diversity and Trade Patterns: The Case of the EU-Mediterranean-Eastern Europe Zone. In: Artal-Tur, A., Peri, G., Requena-Silvente, F. (eds) The Socio-Economic Impact of Migration Flows. Population Economics. Springer, Cham. https://doi.org/10.1007/978-3-319-04078-3_3

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