Immigrant Networks, Trade Creation, and Trade Diversion

CERGE-EI Working Paper No. 329

40 Pages Posted: 1 Apr 2008 Last revised: 30 Nov 2009

See all articles by Tomas Konecny

Tomas Konecny

Czech National Bank (CNB); CERGE-EI (Center for Economic Research and Graduate Education - Economics Institute)

Date Written: August 1, 2009

Abstract

I derive a simple gravity model with matching and use data on foreign-born population located in 19 OECD-member countries to estimate the impact of immigrant links on trade. The relative impact on trade of immigrant networks declines with the GDP of source country and is generally smaller than estimates from preceding studies. The theoretical framework explicitly models forgone bilateral trade and shifts in trade ‡ows due to immigrant links. There is some empirical evidence that immigrant networks change trade ‡ows between countries. The net effect on total trade of a 10-percent increase in the overall immigrant stock varies between -0.12-1.18 percent for host countries and -6.99-2.58 percent for source countries in the sample.

Keywords: international trade, immigration, informal trade barriers

JEL Classification: F22, O24

Suggested Citation

Konecny, Tomas, Immigrant Networks, Trade Creation, and Trade Diversion (August 1, 2009). CERGE-EI Working Paper No. 329. Available at SSRN: https://ssrn.com/abstract=1114122 or http://dx.doi.org/10.2139/ssrn.1114122

Tomas Konecny (Contact Author)

Czech National Bank (CNB) ( email )

Na Prikope 28
CZ-11503 Praha 1
Czech Republic

CERGE-EI (Center for Economic Research and Graduate Education - Economics Institute) ( email )

Politickych veznu 7
Prague 1, 111 21
Czech Republic

HOME PAGE: http://www.cerge-ei.cz

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