The role of vicinity linkages in the Euro-Med region for trade growth

14-04-2017
The role of vicinity linkages in the Euro-Med region for trade growth
The role of vicinity linkages in the Euro-Med region for trade growth

This study explores some important aspects of the trade-migration nexus in the Euro-Med region. It focuses upon the role of historical ties and proximity issues between countries in fostering the trade effects of migrants. More specifically, the research addresses the effect of historical bilateral ties and how they ensure a higher number of social interactions between migrants and natives, increasing the size of the pro-trade effects of migrants. In this setting, the effect of other variables in shaping trade-migration linkages are explored, including the role of immigrants’ characteristics and social integration issues at destination countries.

OECD countries have been experiencing high and rising flows of migrants from different regions of the world. Specifically, 2015 has seen a stock of 125 million foreign-born people in OECD countries and it is the position of this project that flows of immigrants have a positive economic impact at host countries. Despite of the benefits of immigration, the recent notable influx of immigrants and global changes in the political environment have resulted in a more restrictive migration policy in OECD countries and a revised migration legislation.

The existing literature on the migration-trade nexus has identified two main channels through which migration affects trade, namely the preference and the network channels. The “preference” for some home-produced products results in an increase in imports for the host countries. Conversely, “networks” of immigrants promote new business opportunities by reducing transaction trade costs, improving information channels, or moderating institutional failures in business relationships. Networks are therefore able to reduce the entry costs of firms when establishing themselves in a new market or decrease the costs of commercialisation of products given the information flows provided, thus contributing to more sales in existing markets.

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