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Ethnic Networks, Information, and International Trade: Revisiting the Evidence

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  • Gabriel J. Felbermayr
  • Benjamin Jung
  • Farid Toubal

Abstract

Influential empirical work by Rauch and Trindade (REStat, 2002) finds that Chinese ethnic networks of the magnitude observed in Southeast Asia increase bilateral trade by at least 60%. We argue that this estimate is upward biased due to omitted variable bias. Moreover, it is partly related to a preference effect rather than to enforcement and/or the availability of information. Applying a theory-based gravity model to ethnicity data for 1980 and 1990, and focusing on pure network effects, we find that the Chinese network leads to a more modest amount of trade creation of about 15%. Using new data on bilateral stocks of migrants from the World Bank for the year of 2000, we extend the analysis to all potential ethnic networks. We find, i.a., evidence for a Polish, a Turkish, a Mexican, or a Pakistani network. While confirming the existence of a Chinese network, its trade creating potential is dwarfed by other ethnic networks. The large heterogeneity in the trade-creating potential of different networks is, among other things, explained by the share of high-skilled immigrants, the degree of ethnic fragmentation, and GDP per capita.

Suggested Citation

  • Gabriel J. Felbermayr & Benjamin Jung & Farid Toubal, 2009. "Ethnic Networks, Information, and International Trade: Revisiting the Evidence," Working Papers 2009-30, CEPII research center.
  • Handle: RePEc:cii:cepidt:2009-30
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    Cited by:

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    2. Murat Genc & Masood Gheasi & Peter Nijkamp & Jacques Poot, 2012. "The impact of immigration on international trade: a meta-analysis," Chapters, in: Peter Nijkamp & Jacques Poot & Mediha Sahin (ed.), Migration Impact Assessment, chapter 9, pages 301-337, Edward Elgar Publishing.
    3. Heid, Benedikt & Larch, Mario, 2012. "Migration, trade and unemployment," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 6, pages 1-40.
    4. Mariya Aleksynska & Giovanni Peri, 2014. "Isolating the Network Effect of Immigrants on Trade," The World Economy, Wiley Blackwell, vol. 37(3), pages 434-455, March.
    5. Sanne Hiller, 2014. "The Export Promoting Effect of Emigration: Evidence from Denmark," Review of Development Economics, Wiley Blackwell, vol. 18(4), pages 693-708, November.
    6. Egger, Peter H. & Ehrlich, Maximilian v. & Nelson, Douglas R., 2020. "The trade effects of skilled versus unskilled migration," Journal of Comparative Economics, Elsevier, vol. 48(2), pages 448-464.
    7. Michał Burzyński & Frédéric Docquier & Hillel Rapoport, 2018. "The Changing Structure of Immigration to the OECD: What Welfare Effects on Member Countries?," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 66(3), pages 564-601, September.
    8. Anthony Edo & Lionel Ragot & Hillel Rapoport & Sulin Sardoschau & Andreas Steinmayr & Arthur Sweetman, 2020. "An introduction to the economics of immigration in OECD countries," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 53(4), pages 1365-1403, November.
    9. Inmaculada Martínez‐Zarzoso & Robert Rudolf, 2020. "The trade facilitation impact of the Chinese diaspora," The World Economy, Wiley Blackwell, vol. 43(9), pages 2411-2436, September.
    10. Magnus Lodefalk, 2016. "Temporary expats for exports: micro-level evidence," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 152(4), pages 733-772, November.
    11. Stefano Breschi & Francesco Lissoni & Ernest Miguelez, 2017. "Foreign-origin inventors in the USA: testing for diaspora and brain gain effects," Journal of Economic Geography, Oxford University Press, vol. 17(5), pages 1009-1038.
    12. Danny McGowan & Chris Milner, 2011. "Trade Costs and Trade Composition," Discussion Papers 11/11, University of Nottingham, GEP.
    13. Felbermayr, Gabriel & Grossmann, Volker & Kohler, Wilhelm, 2012. "Migration, International Trade and Capital Formation: Cause or Effect?," IZA Discussion Papers 6975, Institute of Labor Economics (IZA).
    14. Hiller, Sanne, 2011. "Does Immigrant Employment Matter for Exports? Evidence From Denmark," Working Papers 11-16, University of Aarhus, Aarhus School of Business, Department of Economics.
    15. Xiu-Mei Fu & Han-Xue Chen & Zhen-Kai Xue, 2018. "Construction of the Belt and Road Trade Cooperation Network from the Multi-Distances Perspective," Sustainability, MDPI, Open Access Journal, vol. 10(5), pages 1-16, May.
    16. Docquier, Frédéric & Iftikhar, Zainab, 2019. "Brain drain, informality and inequality: A search-and-matching model for sub-Saharan Africa," Journal of International Economics, Elsevier, vol. 120(C), pages 109-125.
    17. Jens Wrona, 2018. "Border Effects Without Borders: What Divides Japan's Internal Trade?," CESifo Working Paper Series 7056, CESifo.
    18. Lin, Xiaohua & Yang, Xiyan, 2017. "From human capital externality to entrepreneurial aspiration: Revisiting the migration-trade linkage," Journal of World Business, Elsevier, vol. 52(3), pages 360-371.
    19. Christopher Parsons, 2011. "Do Migrants Really Foster Trade? The Trade-Migration Nexus, a Panel Approach 1960-2000," Discussion Papers 11/10, University of Nottingham, GEP.
    20. Samuel Admassu, 2019. "A comparative analysis of African and Asian migrants’ effect on trade," Empirical Economics, Springer, vol. 56(6), pages 2079-2092, June.
    21. Pierre-Louis Vézina, 2010. "Migrant Networks as substitute for institutions: Evidence from Swiss trade," IHEID Working Papers 03-2010, Economics Section, The Graduate Institute of International Studies.
    22. Rodolfo Metulini & Paolo Sgrignoli & Stefano Schiavo & Massimo Riccaboni, 2018. "The network of migrants and international trade," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 35(3), pages 763-787, December.
    23. Pierre-Louis Vézina, 2012. "How Migrant Networks Facilitate Trade: Evidence from Swiss Exports," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 148(III), pages 449-476, September.
    24. Hélène Ehrhart & Maëlan Le Goff & Emmanuel Rocher & Raju Jan Singh, 2012. "Does Migration Foster Exports? An African Perspective," Working Papers 2012-38, CEPII research center.
    25. Hatzigeorgiou, Andreas & Lodefalk, Magnus, 2017. "Anti-Migration as a Threat to Internationalization?," Ratio Working Papers 302, The Ratio Institute.

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    More about this item

    Keywords

    Gravity model; International Trade; Network Effects; International Migration;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration

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