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Analysis of the effect of the NAFTA agreement finds a ‘migration hump’ in a new DEMIG / IMI working paper that challenges neoclassical theories of trade and migration

Trade and migration have often been considered as substitutes – e.g. if trade increases, migration decreases – in neoclassical theory. However, Martin and Taylor (1996) have argued that instead a ‘migration hump’ may occur caused by economic dislocations in the wake of trade reform.

Using new data from the DEMIG C2C database and MOxLAD database for the 1974–2010 period, author Edo Mahendra shows the existence of such a migration hump in the case of Mexico after the introduction of the trade liberalisation agreement NAFTA.

The paper finds that nature of trade and migration relationship changes over time. In the short term, an increase in trade is likely to increase migration and thereby can be considered complements, but in the long term they become substitutes.