International Migration, Trade and Aid: A Survey

Abstract

This paper surveys the voluminous literature on migration affecting trade and the somewhat less developed literature linking aid flows to migration. We aim to guide the reader through the two literatures, highlighting key contributions and identifying important lines of enquiry. Simmering below the surface of both literatures is the issue of causation. Given the macroeconomic nature of the global flows under examination and the numerous direct and indirect links that potentially exist between them, establishing causality proves particularly problematic and is thus an issue that we pay close attention to throughout. The evidence from the trade and migration literature, in which causality has been more concretely established, suggests an almost ubiquitous positive effect of migration on trade, although exceptions exist. This suggests that richer data might be required to delve even deeper into the trade-migration nexus. While policymakers often wish that aid reduces migration, the literature suggests the opposite, namely that aid increases emigration. However, the mechanism has yet to be resolutely established in this literature, which suggests a need for future research.