Understanding the Immigrant–Trade Link
Chapter 12: Are the Effects of Immigrants (Emigrants) on Trade Universal?
12 Are the effects of immigrants (emigrants) on trade universal? More than 50 studies on the topic of the immigrant–trade link have been published in various economics and business journals since 1994. The general finding of these studies is that immigrants and emigrants significantly increase the flow of trade between their respective home and host countries. While we see that this general relationship is largely robust to sample composition, reference period, econometric specification and estimation techniques, the literature has focused on a relatively small number of host countries (that is, immigrant–trade studies) and a few home countries (that is, emigrant–trade studies). Thus, the final question that we address – whether or not the effect of immigrants (emigrants) on trade is universal – is relevant to both social and economic policy. Despite the breadth of available research on the topic, the literature fails to clearly indicate if the effects of immigrants and emigrants on trade flows between their host and home countries is a statistical regularity for all country pairings and, if not, whether country-specific immigrant–trade links are positive, as is often stated/assumed, are negative or are insignificant. There are several reasons to doubt both the universality of immigrants’ (emigrants’) effects on trade and the consistency of the often-implied positive effect in every home and host country. Mundra (2005), for example, employing a non-parametric regression analysis of US immigrant stock and trade data for 47 trading partners that span the years 1973–1980, finds statistically significant negative effects of...
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