Migration, FDI, and the Margins of Trade

The present study develops a simple analytically solvable heterogeneous firm model of trade, investment and migration; where foreign direct investment, international trade and labour migration are determined simultaneously. We estimate the theoretical model based on micro data for 4.5 million companies from the OECD countries. Our estimates confirm that entry costs and firm heterogeneity largely determine the flows of foreign direct investment, international trade and labour migration.