Extract

The rapid growth in the foreign-born population in many OECD countries in recent decades has prompted considerable research on the socioeconomic impacts of immigration. Among this research activity there have been a number of econometric studies conducted since the 1990s that suggest that immigration has a statistically significant positive impact on merchandise trade, starting with Gould (1994). Such a result is theoretically plausible because of both macro and micro considerations. At the macro level, it can be argued that immigration-induced population growth increases aggregate demand and output, which – in turn – increases the demand for imports. Exports may increase as well if the presence of immigrants in export industries lowers unit production costs or if immigration enhances the international competitiveness of the host country more broadly (for example through greater labor mobility and lower prices). At the micro level, immigrants may be expected to have ongoing links with the home country that can help businesses in the host country to develop networks that can facilitate exporting to, or importing from, the migrant home country. Immigrants also have a good understanding of the institutional and legal arrangements in their home country and, where their native language is different from that of the host country, they can improve communication in trading relationships. Having migrants involved in trade can also enhance the trust in the business relationships between the home and host countries.