Sarah Schroeder, Aarhus University

"Mobility Frictions, Remittances and the Distributional Effects of International Trade"

Abstract

In this paper, we study the role of households’ heterogeneous migration decisions and the associated remittances in distributing the benefits of growing trade across space. Relative to ’complete migration’, partial migration implies that part of the household remains in the rural area, while at least one household member migrates to an urban area, usually for better employment opportunities. Here, remittances capture domestic, inter-regional transfers between urban and rural members of the household. We use Chinese household and trade data to establish novel empirical facts that connect trade, migration, and remittances. We quantify the role of diverse modes of migration and remittances by explicitly incorporating these channels in a spatial general equilibrium model of trade and migration. Our quantitative model delivers novel insights about the distributional implications of international trade in the presence of mobility frictions and heterogeneous forms of domestic migration. We further investigate the interplay between trade and migration policy in shaping aggregate welfare.”

Co-authored with Ray Zhang from Sun Yat-Sen University. 

Contact person: Morten Graugaard Olsen