The Trade Effects of Skilled versus Unskilled Migration

Abstract

In this paper we assess the role of skilled versus unskilled migration for bi- lateral trade using a exible reduced-form model where the stocks of skilled and unskilled migrants at the country-pair level are determined as endogenous continuous treatments. The impact of dierent levels of skilled and unskilled migration on the volume and structure of bilateral trade is identied in a quasi-experimental design. This is accomplished through a generalization of propensity score estimation procedures for a case of multivariate multi-valued treatments whereof the bivariate continuous treatment model is a special case. We nd evidence of a polarized impact of skill-specic migration on trade: highly concentrated skilled or unskilled migrants induce higher trade volumes than an balanced composition of the immigrant base. Regarding the structure of trade, skilled migrants tend to induce more trade in dierentiated goods while unskilled migrants tend to induce more trade in standard goods. Both bits of evidence are consistent with a segregation of skill-specic immigrant networks and corresponding consumption patterns and eects on trade.