REGIONAL COOPERATION AND ECONOMIC INTEGRATION

Peri specifications in log-log space and the Cheng and Wall approach:
(3)
SOME ASPECTS OF TRADE STATISTICS AND REPORTING
Equation (3) specifies the gravity model where STOCK ij,t
is the stock of the origin country
population in each of the destination countries expressed as a percentage of the total
population in the host country, GDPpc jt-1
is the GDP per capita of the sending (or origin)
country, GDPpc it-1
is the GDP per capita of the destination (or host) country, POP jt-1
is the
population of the country of origin, POP it-1
is the population of the host country, GINI jt-1
denotes the Gini coefficient of the country of origin, GINI it-1
is the Gini coefficient of the
host country, DIST ij,t
is a proxy variable for distance between country of origin and the host
country, CONTIG ij,t
and COMLANG ij,t
are the dummy variables taking the value of 1 if
the sending country and destination country are contingent and have the same language.
Finally, the terms α are the country-pair individual effects covering all unobservable
i j
factors related to the country-pair migrations costs, λ
t
are time specific effects and ε
is the error term.
The main hypothesis of this paper is that the stock of the migrant population in the
destination country is determined by the income per person differentials between the
sending and host countries. Thus the stock of migration should decrease with the origin
country GDP per capita ( β 1
< 0)
and increase with the host country’s GDP per capita
( β > 0) 2
. According to the Ortega and Peri (2009) specifications, the GDP per capita
of the destination country, which is measured as PPP gross domestic product per person,
explicitly captures the effect of the difference in incomes between the destination and origin
countries. In particular, the assumption is that average expected labour income in the host
country is adequately measured by GDP per capita of the destination country.
If we suppose that costs of migrants increase with distance, a negative sign for β
7
is
expected. Distance fundamentally determines migration. For instance, Central and Eastern
European countries, which are geographically closer to the observed EU-15 member
states, may have a distance advantage in comparison with the developing North African
countries. Migration is also higher between a pair of countries sharing a border and a
common language. For this reason a positive sign is expected for the term β
8
and β
9
.
As the gravity model in its basic form assumes that the stock of the migrant populations
will increase with the size differentials, 7 a positive sign is expected for this variable as a
measure of size differentials between the sending and receiving countries in the present
analysis.
The supposition is that a country with an increasing population may find it easier to absorb
new immigrants with little consequence for its own population. According to this supposition
, ti j
7 Linnermann (1996) included population as an additional measure of country size, where a positive sign is to
be expected.
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