Immigration, Information, and Trade Margins
Recent theories suggest that better information in destination countries could reduce firmâ€™s fixed export costs,lower uncertaintyo f trade policy responses,and improve policy making processes.To identify the relation betweeninformation and fixed export costs,I investigate how information, measured by immigration, affects extensive and intensive margins.The theoretical model predicts that higher fixed export costs reduce trade along the extensive margin,and higher variable export costs lower trade along both margins.Using a gravity model of Canadaâ€™s trade data with 125 partners over 1988-2004,I find immigrant stocks residing in Canada mainly affect the extensive margin rather than the intensive margin.This is evidence that information primarily affects fixed export costs.
|Date of creation:||31 Oct 2007|
|Date of revision:||31 Oct 2007|
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