Do Economic Integration Agreements Increase Members' Migration? Accounting for Migration in Trade Agreements

ABSTRACT A substantial body of literature establishes that economic integration agreements (EIAs) facilitate trade among member countries. However, their impact on migration flows remains less understood. In this paper, we construct a stylized spatial general equilibrium model to study the impact of economic integration agreements on trade and migration. The model is similar to that of Allen and Arkolakis (2014) and Redding and Rossi‐Hansberg (2017), and yields structural gravity equations for both trade and migration that allow us to estimate the direct impact of trade agreements on trade and migration flows. Given these parameter estimates, we can simulate the spatial model to highlight the general equilibrium effects of trade agreements on trade and migration. In our simulation exercise, we show that if the United States‐Mexico‐Canada Agreement (USMCA) were modified to have the trade‐creating effect of a common market, it would foster more trade within the group and encourage in‐migration from outside the trading bloc. If the USMCA were also modified to allow migration costs to fall to the level of a common market, the within‐migration impact on trade and welfare would be more modest.