Understanding the Immigrant–Trade Link
Chapter 11: Transaction Costs and the Immigrant–Trade Link: Does the Volume of Bilateral Trade Matter?
We have examined a broad set of hypotheses relating to the immigrant– trade link and have reported what we believe is overwhelming evidence on the positive impact of immigrants on trade between their host and home countries. Still, little information exists as to whether immigrants’ pro-trade effects are sensitive to the volume of trade taking place between their home and host countries. The lack of such evidence may be the result of a scarcity of multi-host and/or home country-specific immigrant (emigrant) stock data. The limited availability of data, particularly regarding host country immigrant population stocks, has potentially contributed to the observed minor variation in the estimated influences of immigrants on trade flows. A second explanation could be that the econometric approaches employed in earlier studies fail to allow for the determination of whether the influences of immigrants vary with the volume of trade. Such examination, however, is critical both for a more complete understanding of the different avenues through which immigrants affect trade and for the formulation of social policies that often are based upon the positive role that immigrants play in enhancing their host countries’ trade. 11.1 TRADE VOLUMES, TRANSACTION COSTS AND IMMIGRANTS’ ABILITIES TO AFFECT TRADE We hypothesize that the proportional effects of immigrants on host–home country trade diminish with a rise in the intensity of trade taking place between their host and home countries. The rationale is that trade-related transaction costs are generally lower in environments where trade channels function better and that better functioning trade...
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