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Ethnic Networks and International Trade

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Author Info

  • Epstein, Gil S.

    () (Bar-Ilan University)

  • Gang, Ira N.

    () (Rutgers University)

Abstract

There is a well-established high quality literature on the role of networks, particularly ethnic networks, in international trade. Ethnic networks are a way of overcoming informal barriers (information costs, risk and uncertainty) to trade by building trust and substituting for the difficulty of enforcing contracts internationally. The networks we are interested in are those that form between migrants and natives in the host country and between migrants and their home country. Ethnic networks exist when assimilation is not complete. We consider the struggle of migrants to assimilate and, at the same time, the struggle of the local population to prevent such assimilation. These activities affect trade possibilities. Moreover, we show that it may well be in the interest of migrants who specialize in trade to, at some point in time, turn from investing in assimilation activities and instead invest in anti-assimilation activities in order to preserve immigrants’ preferences for home country goods.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1232.

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Length: 26 pages
Date of creation: Aug 2004
Date of revision:
Publication status: published in: Foders, Federico and Langhammer, Rolf J. (eds), Labor Mobility and the World Economy. Springer: Berlin, Heidelberg 2006, 85-103
Handle: RePEc:iza:izadps:dp1232

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Related research

Keywords: migration; market structure; international trade; ethnicity; discrimination; contracts; assimilation; network; transnational;

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References

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  1. Klaus Zimmermann, 2007. "The economics of migrant ethnicity," Journal of Population Economics, Springer, vol. 20(3), pages 487-494, July.
  2. Le, Anh T, 1999. " Empirical Studies of Self-Employment," Journal of Economic Surveys, Wiley Blackwell, vol. 13(4), pages 381-416, September.
  3. Lofstrom, Magnus, 1999. "Labor Market Assimilation and the Self-Employment Decision of Immigrant Entrepreneurs," IZA Discussion Papers 54, Institute for the Study of Labor (IZA).
  4. Gil Epstein & Shmuel Nitzan, 2006. "Reduced prizes and increased effort in contests," Social Choice and Welfare, Springer, vol. 26(3), pages 447-453, June.
  5. Gang, Ira N. & Zimmermann, Klaus F., 1999. "Is Child like Parent? Educational Attainment and Ethnic Origin," IZA Discussion Papers 57, Institute for the Study of Labor (IZA).
  6. Gil S. Epstein, 2003. "Labor Market Interactions Between Legal and Illegal Immigrants," Review of Development Economics, Wiley Blackwell, vol. 7(1), pages 30-43, February.
  7. Hillel Rapoport & Avi Weiss, 2001. "The Optimal Size for a Minority," Working Papers 2001-01, Department of Economics, Bar-Ilan University.
  8. Jonathan Morduch, 1999. "The Microfinance Promise," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1569-1614, December.
  9. Gang, Ira N & Rivera-Batiz, Francisco L, 1994. "Labor Market Effects of Immigration in the United States and Europe: Substitution vs. Complementarity," Journal of Population Economics, Springer, vol. 7(2), pages 157-75.
  10. Chiswick, Barry R, 1978. "The Effect of Americanization on the Earnings of Foreign-born Men," Journal of Political Economy, University of Chicago Press, vol. 86(5), pages 897-921, October.
  11. Lindbeck, Assar & Snower, Dennis J, 1988. "Cooperation, Harassment, and Involuntary Unemployment: An Insider-Outsider Approach," American Economic Review, American Economic Association, vol. 78(1), pages 167-88, March.
  12. James E. Rauch, 2001. "Business and Social Networks in International Trade," Journal of Economic Literature, American Economic Association, vol. 39(4), pages 1177-1203, December.
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