One additional African migrant creates about USD 2,800 (a year) in additional exports for his/her country of origin

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Standard trade literature tends to view migration and trade as substitutes. In that framework, either workers migrate to satisfy foreign demand or foreign demand is satisfied by trading goods and services. There is a growing literature, however, emphasizing that migrant networks facilitate bilateral economic transactions by disseminating their preferences for goods from their country of origin and/or by removing informational and cultural barriers between hosts and origin countries. In this case, migration would reduce transaction costs associated with trade and may be a complement rather than a substitute to trade.

In a recent CEPII Working Paper written jointly with Hélène Ehrhart, Maëlan Le Goff and Emmanuel Rocher, we empirically examine this relationship for African countries, relying on a new dataset on international bilateral migration recently released by the World Bank spanning from 1980 to 2010. African products might particularly suffer from large informal trade barriers stemming from the relatively weak legal institutions present in African countries, and from inadequate and limited information about international trading opportunities in these countries. Hence, given the large increase in African migration, one might wonder whether these movements in population had any effect on stimulating African exports.

We find significant evidence of a pro-exports effect of migration from Africa, especially strong for the exports of differentiated products. Our results suggest that one additional African migrant creates about USD 2’800 (a year) in additional exports for his/her country of origin. This positive effect of African migration on exports can be partly explained by the weakness of institutions in the continent, since we also find that the weaker the institutions in the countries of origin, the more migrants contribute to trade. Migrant networks, by reducing opportunistic behavior such as cheating for instance, strengthen contract enforcement. By building trust or acting as its substitute, they can thus especially favor exports in countries with weak legal institutions.

These results emphasize the fundamental role played by migrants in mitigating significant barriers to trade in Africa: large informational costs, institutional weaknesses as well as cultural dissimilarities and lack of trusting relationships.

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Authors

Raju Jan Singh

World Bank Lead Economist & Program Leader for Haiti

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