Are Migration and Trade Substitutes or Complements? Evidence from Nigeria

Abstract

The link between migration and trade has attracted much research attention regarding developed economies. Nigeria is highly an open economy both in terms of goods and factor flows, particularly labor. Emigration rate to Nigeria’s major trading partners is on the increase and so too are workers’ remittances from destination countries. Adopting the gravity model based on modified Hescher-Ohlin framework, this paper estimates the trade-migration nexus between Nigeria and five of her major trading partners. With the aid of 2SLS and Generalized Method of Moments estimation procedures, it found that there exists a significant complementarity in the link between imports and migration and substitution with exports. Thus, policy makers should take critical note of migration and its implication for trade policy formulation. Specifically, the authorities need to choose between allowing for emigration that would result in gains in remittances and knowledge spillover or engage in aggressive trade expansion with mild reduction in emigration or both.