An empirical analysis on immigrants and price elasticity in the import demand function

Abstract

PurposeThe purpose of this paper is to explore the empirical relationship between the share of immigrants and the price elasticity of import demand.Design/methodology/approachWe estimate the import demand function including the interaction term of the share of immigrants and relative import price, using panel data of 76 countries/areas.FindingsThe coefficient of the interaction term is significantly positive, that is, a higher share of immigrants weakens the negative effect of the relative import price on import demand. Our findings reveal the negative relationship between the share of immigrants and the price elasticity of import demand.Practical implicationsThe share of immigrants is increasing in the present era of globalization, and it is possible that the role of exchange rate as the price adjustment mechanism in international trade become lower in the future.Originality/valueThis research considers different price elasticities for import goods by immigrants and natives.