The Impact of Migration on Foreign Trade in Bolivia

Abstract

While the causal relationship between migration and trade has not been studied thoroughly, estimation results of empirical studies suggest that important aspects determining trade volumes can be missed if additional factors, including migration, are not considered. The current paper aims at testing the impact of migration on foreign trade in a small economy like Bolivia. We test the impact of both, immigration and emigration on exports and imports and also on intra-industry trade. We use gravity model approach to this end. We control for the economic size and geographical location of trade partners, and for changes in terms of trade. Our results show relatively similar impact of both immigration and emigration on foreign trade, confirming positive significant effect of immigration on exports and imports also in Bolivia, even when the migration flows in Bolivia are not as high as in the case of most countries analyzed previously. The imports elasticities are slightly higher, both elasticities are closer to the lower margin of the range based on previous studies. We can conclude positive effect of migration flows also on intra-industry trade, somewhat surprisingly the impact of emigration being much higher than that of immigration. Our estimation results on Bolivia show that migration has effect on foreign trade, even if the share of migrants in the population is low.