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The link between immigration and trade in developing countries

  • José Vicente Blanes

    (Universidad Pablo de Olavide)

International trade can foster economic development. This paper examines the link between immigration from developing countries to OECD countries and their bilateral trade; it also explores some possible mechanism behind this link. It uses a gravity equation for trade augmented by an immigrant stock variable and a set of control variables. The immigrants’ variable enters the estimated equation in different ways depending on immigrants’ relevant characteristics both individual and non individual-specific. Results show that in developing countries there is a positive link between immigration and both exports and imports. We find evidence for the trade transaction cost channel but not for the preference one. We identify the social or ethnic network effect as the mechanism behind this link since immigrants related to business activities are the ones who have a positive effect on bilateral trade.

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File URL: http://www.aeefi.com/RePEc/pdf/defi10-07.pdf
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Paper provided by Asociación Española de Economía y Finanzas Internacionales in its series Working Papers with number 10-07.

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Length: 39 pages
Date of creation: Oct 2010
Date of revision:
Handle: RePEc:aee:wpaper:1007
Contact details of provider: Web page: http://www.aeefi.com

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