Migration, investment and trade: Substitutes or complements?

Abstract

The paper examines three aspects of the relationship between Migration, Investment and Trade (MIT). First, the paper first examines the impact of policy change in one MIT variable on the other MIT variables. It considers Mundell's (1957) substitution and Markusen's (1983) complementarity models-contributing to the latter-as well as models with migration costs and credit constraints. Second, the paper examines the MIT relationship under policy changes and economic shocks, including trade and migration costs, income taxes, government expenditures, and more. The MIT relationship is examined separately for skilled and unskilled labor, trade in goods and services, horizontal and vertical FDI, proximate and distant countries. The paper examines also the impact of migration on education, the MIT relationship under social integration policy and domestic and international cooperation. The paper derives answers to policy questions, including i) whether MIT policies should be determined jointly, ii) whether trade liberalization should be accompanied by stronger immigration controls; iii) whether source and host countries should cooperate on setting MIT policies, and iv) if they do, whether cooperation should take place at the bilateral, regional or multilateral level.