The Role of Migration in the Variety and Quality of Trade: Evidence from Germany

Abstract

Abstract We explore the migration-trade nexus in the case of Germany over the period 2000-09, disentangling the two dimensions of intra-industry trade (vertical and horizontal). We find that immigration is positively and significantly related to intraindustry trade. However, the magnitude and statistical significance of migration’s impact on trade are considerably higher for horizontal intra-industry trade and increase with the difference in the level of development between Germany and the partner countries. This pattern is consistent with the view that information flows between migrant communities and their country of origin may be more important for consumer goods (where trade in varieties prevails) and that this information effect is more important if trading countries are very different.

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