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International migration, trade and investment: Complementarity or substitutability

Munir Hassan, University of Nebraska - Lincoln


During the past decades, international migration has assumed much prominence. Manifested in flows of permanent settlers, asylum seekers, refugees, contract workers and undocumented migrants, the global stock of international migrants has increased steadily. The current stock of international migrants ranges from 130 to 145 million. The experience with international migration is common among all geographical regions; varying only in level, type, proportion of population, and the duration of migration. ^ International migration has raised much concern among both labor-sending and labor-receiving countries. Migrant-receiving countries are increasingly concerned about the adverse affects of large scale migration, perceived diminished capacity to absorb additional migrants, impact on cultural homogeneity and the law and order situation, and the effects on job conditions of unskilled workers. The loss of professional and technical people, leading to a decrease in native talent to participate in the global system, is a major concern among labor-sending countries. ^ Apprehensive of various adverse effects, policy planners in labor-sending countries have focused a considerable amount of attention on the use of trade, aid, and investment as disincentives to migration. These policies are aimed at creating greater and better job opportunities in-migrant sending countries, reducing wage differentials, paving the way for long-term development. Underlying these issues has been the assumption that trade is a substitute for migration, and that aid and investments are adequately and appropriately geared to economic development. Past experience has, however, demonstrated that such assumptions do not always hold in reality. Factor prices, therefore, do not necessarily equalize following trade; official development assistance is inadequate and caters to domestic interest groups; and foreign investment does not create jobs for those prone to migration. ^ A widely held contrary view is now emerging where international migration is seen as being a complement to commodity trade. Migrants bring with them not only new skills and training, but, also, food habits, tastes, cultural values, and individual preferences. Their presence abroad creates a new export market for labor-exporting countries. In free economies, market forces respond to such preferences, and the desired goods get imported. A casual look at shops and market places in areas with a concentration of migrant populations testifies to the existence of such a complementarity between international and migration. ^ This study has been an attempt towards understanding and explaining the role of international migration as a complement to trade. Based on the experience of Bangladesh, it has been demonstrated that complementarity between international migration exists with respect to the export of items such as fish, vegetables, fruits, feature films, books, magazines, handicrafts, ceramic products, etc. Broadly, these refer to export items such as food, clothing and apparel, recreational and household items. ^ Such a complementarity is re-enforced by the level, concentration and composition of migrants, as well as the duration of the process of migration. A greater concentration of migrants at a particular location helps market development; longer duration enables a gradual broadening of commodity composition of exports. The migration-trade link is also affected by trade policies pursued by both the labor sending and labor receiving countries. A liberal trade policy on the part of a labor-receiving country is fundamental. However, from a labor sending country's point of view, trade liberalization, deregulation of restrictive measures and the development of transportation links encourage migration and trade linkages. A well-developed transportation link is particularly important. ^

Subject Area

Economics, Commerce-Business|Economics, Finance|Sociology, Demography

Recommended Citation

Hassan, Munir, "International migration, trade and investment: Complementarity or substitutability" (1999). ETD collection for University of Nebraska - Lincoln. AAI9929203.