Does Migration Matter in Trade? A Study of India's Exports to the GCC Countries

Abstract

This article examines India's exports to the Gulf Cooperation Council (GCC) countries with a special focus on the influence of migration. In order to explain the growing orientation of India's exports towards the Gulf countries, we analyse the demand pattern of GCC as represented by its import structure. The GCC countries’ import structure reveals the influence of the Indian diaspora and the possible migration–trade link. The hypothesis of migration–trade nexus is further verified using a longitudinal gravity-type model. The econometric evidence also illustrates the strong immigrant preference effect for their home-country products. Thus, the preference similarity mechanism is seen to work in the India–GCC context despite the violation of its crucial assumption of income similarity. Overall, the study brings out the importance of migrant population as a unique source of advantage for India's exports to the region.

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