FEEM working papers "Note di lavoro" series
2013 .020

The Impact of Immigration on Portuguese Intra-Industry Trade


Authors: Nuno Carlos Leitão
Series: Economy and Society
Editor: Giuseppe Sammarco
Keywords: Gravity Model, Horizontal and Vertical Intra-industry Trade Immigration and Panel Data
JEL n.: C20, C30, F12, L10

Abstract

This paper investigates the relationship between intra-industry trade (IIT) and immigration flows using a gravity model for the period 2000-2010 between Portugal and European Union’s Member States (EU-27). The present study uses the methodology of Kandogan (2003) for separating IIT into its components horizontal (HIIT) and vertical intra-industry trade (VIIT). Using a panel data approach, our study find that immigration has a positive influence on Portuguese intra-industry trade. These results indicate that the immigration can reduce transaction costs between home and host country. We also consider in econometric model, the economic dimension which appears to exercise a positive effect on IIT. Our results confirm the hypothesis that there is a negative effect of transportation costs on trade.

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