Migration and Trade Flows: New evidence from Spanish Regions

We analyze migrants’ pro-trade effects through a theory-consistent gravity model augmented with migration variables - both immigration and emigration. We take sub- national units, i.e. Spanish NUTS3 regions and allow for subnationally heterogeneous multilateral resistance terms, implying diversified exporting capacity of provinces. We implement an econometric strategy based on Head and Mayer (2014), which leads us to selecting the Gamma PML estimator. Comparing the Gamma with OLS estimator we highlight some shortcomings of previous literature. In particular, language common- ality is found to magnify the pro-trade effect of immigrants, differently from previous literature; both emigrants’ and immigrants’ networks are found to exert a positive and significant pro-trade effect, but in different ways: immigrants affect trade through their local networks, whereas emigrants affect trade through their national networks.