International Trade and Migration: Why Do Migrants Choose Small Countries?

This paper analyses the link between migration and sizes of countries. It explains why larger countries (in terms of population) have lower shares of migrants in their populations. First, the data is analysed; next, a macroeconomic model with international trade and migration, explaining the stylised facts, is developed. The model includes country size, which gives rise to cheaper country-specific goods produced in a large country relative to the goods produced in a smaller country. Higher wages in the small country spur immigration to it.