Immigrant Networks, Trade Creation, and Trade Diversion
CERGE-EI Working Paper No. 329
40 Pages Posted: 1 Apr 2008 Last revised: 30 Nov 2009
Date Written: August 1, 2009
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: Suggested Citation