Analysis of Gravity Model on the Relationship Between Foreign Trade and Immigration: The Case of Germany
Halil Özekicioğlu, Semanur SoyyiğitDış Ticaret ve Göç İlişkisi Üzerine Bir Çekim Modeli Analizi: Almanya Örneği
Halil Özekicioğlu, Semanur SoyyiğitAlthough there has been an environment in which global neo-mercantilist protectionist policies have increased in recent times and the countries have further tightened immigration policies, the increase in bilateral trade and migration among the countries remains the two most important results of globalization. Some authors who address the relationship between these two outcomes of globalization have developed a theory that a country’s migration affects trade activities between the host country and the emigrant source country. Gould (1991) stated that this relationship could be realized through two mechanisms. The first is the increase in the import of the host country from the source country as a result of migrants carrying their consumption habits to the host country. The other mechanism is that transaction costs incurred in the process of acquiring information and establishing a trade relationship will be reduced due to immigrants. This is the reason why immigrants’ native language is frequently used and known in the host country and that migrants carry information about their consumption preferences in their own countries to the host country. It is stated that bilateral trade between countries will increase by means of these interaction mechanisms.
In the literature, a large number of empirical studies were encountered, which examined the relationship between international trade and international migration for different countries. In these studies, the bilateral trade relations between the immigrant-receiving country, which is a center of attraction, and the emigrant countries were analyzed. From this point of view, this study aims to examine the relationship between international trade and migration for Germany, which is the center of attraction of Europe. Germany is the country with the highest number of immigrants among the European Union countries and the share of Central and Eastern European (CEE) countries is very high among the emigrant countries in Europe. In view of this situation, in the study, it was aimed to examine whether the migration of Germany from the mentioned countries was effective in the foreign trade activities with these countries.
CEE countries, based on the definition of the OECD have been determined as Albania, Bulgaria, Croatia, Czech Republic, Hungary, Poland, Romania, Slovakia, Slovenia, Estonia, Latvia and Lithuania. In the study covering the data set from 2000 to 2016, a panel gravity model was used.
In the study the dependent variables are export and import while the independent variables are the number of immigrants, GDP and per capita GDP of the emigrant countries, the distance between the host country and emigrant countries, and the dummy variable which represents the Customs Union memberships of the countries.
In the study, which was modeled for both export and import, findings showed that there was not any significant relationship between the migration and foreign trade of Germany. In the study, which was modeled for both export and import, findings showed that there was not any significant relationship between the migration to Germany and the foreign trade of Germany with CEE countries. On the other hand, GDP, per capita GDP, distance and dummy variables were found to be significant in the model in which export is the dependent variable. According to this, a positive relationship was found between the GDP level of CEE countries and Germany’s exports in accordance with theoretical expectation. On the other hand, there is a negative relationship between GDP per capita in CEE countries and Germany’s exports, contrary to theoretical expectation. Accordingly, per capita income, which represents the level of welfare in CEE countries, reduces imports from Germany. This situation, which is contrary to theoretical expectation, is thought to be related to the fact that these countries are former Soviet Union countries. The distance variable has a negative effect on the export, in line with the expectation. The dummy variable added to determine the impact of the Customs Union membership of the CEE countries revealed a statistically significant and positive relationship. In other words, countries’ membership to the Customs Union positively affects the export of Germany. In the import model, only the Customs Union dummy variable was significant. Accordingly, the membership of the CEE countries to the Customs Union has an increasing impact on Germany’s imports.
In summary, it can be stated that Germany did not see an increase in exports from migration. On the other hand, it can be stated that both sides of the relationship are benefiting from regional integration through Customs Union membership.
