Do Foreign Workers Reduce Trade Barriers? Microeconomic Evidence

25 Pages Posted: 13 Sep 2017

See all articles by Martyn J. Andrews

Martyn J. Andrews

University of Manchester - School of Social Sciences

Richard Upward

University of Nottingham - School of Economics

Thorsten Schank

Johannes Gutenberg University Mainz

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Date Written: September 2017

Abstract

This paper provides evidence that foreign workers reduce firms’ trade costs and thus increase the probability that firms export. This informs both the literature on trade costs and the microeconomic literature on firms’ export behaviour. We identify the nationality of each worker in a large sample of German establishments and relate this to the exporting behaviour of these establishments. We allow for the possible endogeneity of an establishment's workforce by instrumenting the share of foreign workers with the regional distribution of foreign workers in the wider labour market. We find a significant effect of worker nationality on exporting which is not driven by the industrial, occupational or locational concentration of migrants. The effect is much stronger for senior occupations, who are more likely to have a role in exporting decisions by the establishment. The relationship is also stronger when we consider exports to particular regions and workers from these regions, consistent with a gravity model in which trade flows from country i to j are a function of migrants from j in i.

Keywords: international migration, trade barriers, exports, employer‐employee data, firm‐level analysis

Suggested Citation

Andrews, Martyn J. and Upward, Richard and Schank, Thorsten, Do Foreign Workers Reduce Trade Barriers? Microeconomic Evidence (September 2017). The World Economy, Vol. 40, Issue 9, pp. 1750-1774, 2017, Available at SSRN: https://ssrn.com/abstract=3036200 or http://dx.doi.org/10.1111/twec.12486

Martyn J. Andrews (Contact Author)

University of Manchester - School of Social Sciences ( email )

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Richard Upward

University of Nottingham - School of Economics ( email )

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Thorsten Schank

Johannes Gutenberg University Mainz ( email )

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