Chapter 18. Migration, International Trade, and Capital Formation : Cause or Effect?

In this chapter, we provide an overview of the relationship between international migration and international trade as well as capital movements. We start out by identifying key issues through a brief comparison between modern migration and the mass migration of the nineteenth century, followed by a review of insights that can be drawn from a general factor proportions model about the positive and normative effects of migration, compared to trade. Subsequently we turn to a detailed analysis of the interrelationship between migration and capital formation as well as accumulation of technological knowledge. Finally, we use the gravity model to explore the interrelationship between bilateral trade and migration, with special emphasis on trade costs and network effects.