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Ethnic Networks and International Trade

In: Labor Mobility and the World Economy

Author

Listed:
  • Gil S. Epstein

    (Bar-Ilan University
    CEPR
    Institute for the Study of Labor (IZA))

  • Ira N. Gang

    (Rutgers University, New Brunswick)

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 antiassimilation activities in order to preserve immigrants’ preferences for home country goods.

Suggested Citation

  • Gil S. Epstein & Ira N. Gang, 2006. "Ethnic Networks and International Trade," Springer Books, in: Rolf J. Langhammer & Federico Foders (ed.), Labor Mobility and the World Economy, pages 85-103, Springer.
  • Handle: RePEc:spr:sprchp:978-3-540-31045-7_6
    DOI: 10.1007/978-3-540-31045-7_6
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    References listed on IDEAS

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    1. Ira N. Gang & Klaus F. Zimmermann, 2000. "Is Child like Parent? Educational Attainment and Ethnic Origin," Journal of Human Resources, University of Wisconsin Press, vol. 35(3), pages 550-569.
    2. Rapoport, Hillel & Weiss, Avi, 2003. "The optimal size for a minority," Journal of Economic Behavior & Organization, Elsevier, vol. 52(1), pages 27-45, September.
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    4. Magnus Lofstrom, 2002. "Labor market assimilation and the self-employment decision of immigrant entrepreneurs," Journal of Population Economics, Springer;European Society for Population Economics, vol. 15(1), pages 83-114.
    5. 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.
    6. Klaus Zimmermann, 2007. "The economics of migrant ethnicity," Journal of Population Economics, Springer;European Society for Population Economics, vol. 20(3), pages 487-494, July.
    7. Anh T. Le, 1999. "Empirical Studies of Self‐Employment," Journal of Economic Surveys, Wiley Blackwell, vol. 13(4), pages 381-416, September.
    8. Gil Epstein & Shmuel Nitzan, 2006. "Reduced prizes and increased effort in contests," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 26(3), pages 447-453, June.
    9. Jonathan Morduch, 1999. "The Microfinance Promise," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1569-1614, December.
    10. 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 167-188, March.
    11. Francisco L. Rivera-Batiz, 2018. "The Labor Market Effects of Immigration in the United States and Europe: Substitution vs. Complementarity," World Scientific Book Chapters, in: Francisco L Rivera-Batiz (ed.), International and Interregional Migration Theory and Evidence, chapter 4, pages 47-74, World Scientific Publishing Co. Pte. Ltd..
    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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    Citations

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    Cited by:

    1. Massimiliano Bratti & Luca Benedictis & Gianluca Santoni, 2014. "On the pro-trade effects of immigrants," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 150(3), pages 557-594, August.
    2. Sergio Vergalli, 2011. "Entry and Exit Strategies in Migration Dynamics," Journal of Labor Research, Springer, vol. 32(4), pages 362-389, December.
    3. Gil S. Epstein & Ira N. Gang, 2010. "A Political Economy of the Immigrant Assimilation: Internal Dynamics," Working Papers 2010-13, Bar-Ilan University, Department of Economics.
    4. Thomas Siedler, 2007. "Does Parental Unemployment Cause Right-Wing Extremism?," Discussion Papers of DIW Berlin 666, DIW Berlin, German Institute for Economic Research.
    5. Gil S. Epstein & Ira N. Gang, 2009. "Ethnicity, assimilation, and harassment in the labor market," Research in Labor Economics, in: Amelie F. Constant & Konstantinos Tatsiramos & Klaus F. Zimmermann (ed.), Ethnicity and Labor Market Outcomes, volume 29, pages 67-88, Emerald Publishing Ltd.
    6. Gil Epstein, 2007. "Extremism within the family," Journal of Population Economics, Springer;European Society for Population Economics, vol. 20(3), pages 707-715, July.
    7. Gil S. Epstein, 2012. "Migrants, Ethnicity and the Welfare State," Korean Economic Review, Korean Economic Association, vol. 28, pages 117-136.
    8. Siedler, Thomas, 2006. "Family and Politics: Does Parental Unemployment Cause Right-Wing Extremism?," IZA Discussion Papers 2411, Institute of Labor Economics (IZA).
    9. Michele Moretto & Sergio Vergalli, 2008. "Managing Migration through Quotas: an Option-theory Perspective," Working Papers 0805, University of Brescia, Department of Economics.
    10. Ilhom Abdulloev & Gil S. Epstein & Ira N. Gang, 2014. "Ethnic Goods and Immigrant Assimilation," Working Papers 2014-03, Bar-Ilan University, Department of Economics.
    11. Sergio Vergalli, 2008. "The Role of Community in Migration Dynamics," LABOUR, CEIS, vol. 22(3), pages 547-567, September.
    12. Marion Jansen & Roberta Piermartini, 2009. "Temporary Migration and Bilateral Trade Flows," The World Economy, Wiley Blackwell, vol. 32(5), pages 735-753, May.
    13. Sergio Vergalli, 2006. "Dynamics in Immigration Community," Working Papers ubs0613, University of Brescia, Department of Economics.
    14. Gil Epstein & Yosef Mealem, 2010. "Interactions between local and migrant workers at the workplace," CReAM Discussion Paper Series 1016, Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London.
    15. Gil S. Epstein & Ira N Gang, 2006. "Migrants, Ethnicity and Strategic Assimilation," Departmental Working Papers 200630, Rutgers University, Department of Economics.
    16. Peter H. Egger & Maximilian von Ehrlich & Douglas R. Nelson, 2012. "Migration and Trade," The World Economy, Wiley Blackwell, vol. 35(2), pages 216-241, February.
    17. Andreas Knabe & Steffen Rätzel & Stephan L. Thomsen, 2013. "Right-Wing Extremism and the Well-Being of Immigrants," Kyklos, Wiley Blackwell, vol. 66(4), pages 567-590, November.
    18. Michele Moretto & Sergio Vergalli, 2010. "Managing Migration Through Conflicting Policies: An Option‐Theory Perspective," Scottish Journal of Political Economy, Scottish Economic Society, vol. 57(3), pages 318-342, July.
    19. Harrie Verbon & Lex Meijdam, 2008. "Too many migrants, too few services: a model of decision-making on immigration and integration with cultural distance," Journal of Population Economics, Springer;European Society for Population Economics, vol. 21(3), pages 665-677, July.
    20. Devesh Roy & Abdul Munasib & Xing Chen, 2014. "Social trust and international trade: the interplay between social trust and formal finance," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 150(4), pages 693-714, November.
    21. Dana Schüler & Julian Weisbrod, 2006. "Ethnic Fractionalization, Migration and Growth," Ibero America Institute for Econ. Research (IAI) Discussion Papers 148, Ibero-America Institute for Economic Research.
    22. Dana Schüler & Julian Weisbrod, 2010. "Ethnic fractionalisation, migration and growth," Empirical Economics, Springer, vol. 39(2), pages 457-486, October.
    23. Jacques Poot & Anna Strutt, 2010. "International Trade Agreements and International Migration," The World Economy, Wiley Blackwell, vol. 33(12), pages 1923-1954, December.
    24. Richard B. Freeman, 2013. "One Ring to Rule Them All? Globalization of Knowledge and Knowledge Creation," NBER Working Papers 19301, National Bureau of Economic Research, Inc.
    25. Gil Epstein, 2009. "Willingness to Assimilate and Ethnicity," Nordic Journal of Political Economy, Nordic Journal of Political Economy, vol. 35, pages 1-1.

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    More about this item

    Keywords

    Local Population; International Trade; Host Country; Migrant Population; Ethnic Enclave;
    All these keywords.

    JEL classification:

    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • I20 - Health, Education, and Welfare - - Education - - - General
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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