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Bidirectional Causal Relationship Between Foreign Trade And Immigration: Evidence From NAFTA

The relationship between foreign trade and immigration has long been discussed in the international trade literature. Theoretical and empirical studies suggest that free trade policies such as Free Trade Agreements as might weaken the immigration flows. In the light of this concept, one of the most important contemporary attempts is the North American Free Trade Agreement (NAFTA) in 1992 between United States, Canada, and Mexico due to its size of effect in the region. One of the reasons to create NAFTA was to increase bilateral trade in order to decrease immigration flows from
Mexico to the United States (US). Yet, there has been a debate on trade-immigration relation so far.

Some scholars have assumed that there is a one-directional negative relationship between foreign trade and immigration in which they are treated as substitutes. Others have claimed that there is a positive relationship between trade and immigration so that they actually complement. The main aim of this paper is to find a bidirectional causal relationship between immigration and foreign trade in the case of the US and Mexico under NAFTA.

This research utilizes annual data of import and export between the US and Mexico and authorized immigration from Mexico to the US between 1999 and 2016 by employing Granger-Causality Test. The findings of the analysis exhibited that there is a bidirectional causal relationship between bilateral trade of US and Mexico and immigration from Mexico to the US under NAFTA. Therefore, it may well be said that NAFTA as free trade policy is not an effective policy to mitigate immigration flows from Mexico to the US as policy makers predicted.

Keywords: NAFTA, immigration, foreign trade, Granger-Causality Test
JEL Code: F, F1

Duygu Ekin Şimşek
University of Essex, Colchester, United Kingdom

InTraders Uluslararası Ticaret Kongresi = InTraders international conference on international trade
(II. : 2018: Sakarya)
II. InTraders uluslararası ticaret kongresi: özet kitabı = The second InTraders international conference
on international trade : abstract book / editörler Kürşat Çapraz, Mustafa Yılmaz. – İstanbul: Hiperlink

The 3rd InTraders International Conference On International Trade,15-16-17 April 2019, Turkey, Sakarya. İstanbul Program 18-19-20 April 2019.

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