Abstract
This paper examines the hypotheses that a greater stock of migrants in New Zealand from a particular country leads to more trade between that country and New Zealand, and a greater stock of New Zealanders living overseas in a particular country leads to more trade between that country and New Zealand. It also examines the relationships between migration, diaspora and tourism exports. The literature suggests that migrants can stimulate trade by lowering transaction costs, and by bringing with them preferences for goods produced in their home country. Our approach is to apply panel data techniques, within the framework of a standard gravity model of trade, to a dataset consisting of information on 233 countries in each of the 26 years between 1981 and 2006. We estimate a random effects panel sample selection model using correlated random effects. Our results indicate that migration does indeed stimulate trade. In our benchmark specification, merchandise exports from and imports to New Zealand both have a statistically significant relationship with numbers of migrants in New Zealand; imports also have a statistically significant relationship with numbers of New Zealanders overseas. Our results also suggest that migration stimulates imports more than exports.