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Ethnic Networks and International Trade

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  • Epstein, Gil S
  • Gang, Ira

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.

Suggested Citation

  • Epstein, Gil S & Gang, Ira, 2004. "Ethnic Networks and International Trade," CEPR Discussion Papers 4616, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:4616
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    References listed on IDEAS

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    1. 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.
    2. 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.
    3. Rapoport, Hillel & Weiss, Avi, 2003. "The optimal size for a minority," Journal of Economic Behavior & Organization, Elsevier, vol. 52(1), pages 27-45, September.
    4. 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.
    5. 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.
    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. 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.
    8. Le, Anh T, 1999. " Empirical Studies of Self-Employment," Journal of Economic Surveys, Wiley Blackwell, vol. 13(4), pages 381-416, September.
    9. 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.
    10. Jonathan Morduch, 1999. "The Microfinance Promise," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1569-1614, December.
    11. 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;European Society for Population Economics, vol. 7(2), pages 157-175.
    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. 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.
    3. Thomas Siedler, 2007. "Does Parental Unemployment Cause Right-Wing Extremism?," Discussion Papers of DIW Berlin 666, DIW Berlin, German Institute for Economic Research.
    4. Epstein, Gil S. & Gang, Ira N., 2008. "Ethnicity, Assimilation and Harassment in the Labor Market," IZA Discussion Papers 3591, Institute for the Study of Labor (IZA).
    5. Gil Epstein, 2007. "Extremism within the family," Journal of Population Economics, Springer;European Society for Population Economics, vol. 20(3), pages 707-715, July.
    6. Gil S. Epstein, 2012. "Migrants, Ethnicity and the Welfare State," Korean Economic Review, Korean Economic Association, vol. 28, pages 117-136.
    7. Siedler, Thomas, 2006. "Family and Politics: Does Parental Unemployment Cause Right-Wing Extremism?," IZA Discussion Papers 2411, Institute for the Study of Labor (IZA).
    8. Ilhom Abdulloev & Gil S. Epstein & Ira N. Gang, 2014. "Ethnic Goods and Immigrant Assimilation," Working Papers 2014-03, Bar-Ilan University, Department of Economics.
    9. Sergio Vergalli, 2008. "The Role of Community in Migration Dynamics," LABOUR, CEIS, vol. 22(3), pages 547-567, September.
    10. Sergio Vergalli, 2006. "Dynamics in Immigration Community," Working Papers ubs0613, University of Brescia, Department of Economics.
    11. Epstein, Gil S. & Mealem, Yosef, 2010. "Interactions between Local and Migrant Workers at the Workplace," IZA Discussion Papers 5051, Institute for the Study of Labor (IZA).
    12. Gil S. Epstein & Ira N Gang, 2006. "Migrants, Ethnicity and Strategic Assimilation," Departmental Working Papers 200630, Rutgers University, Department of Economics.
    13. 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.
    14. 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.
    15. Sergio Vergalli, 2011. "Entry and Exit Strategies in Migration Dynamics," Journal of Labor Research, Springer, vol. 32(4), pages 362-389, December.
    16. 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.
    17. 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.
    18. Michele Moretto & Sergio Vergalli, 2008. "Managing Migration through Quotas: an Option-theory Perspective," Working Papers 2008.51, Fondazione Eni Enrico Mattei.
    19. Michele Moretto & Sergio Vergalli, 2010. "Managing Migration Through Conflicting Policies: An Option-Theory Perspective," Scottish Journal of Political Economy, Scottish Economic Society, vol. 57(s1), pages 318-342, July.
    20. 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.
    21. Dana Schüler & Julian Weisbrod, 2010. "Ethnic fractionalisation, migration and growth," Empirical Economics, Springer, vol. 39(2), pages 457-486, October.
    22. Jacques Poot & Anna Strutt, 2010. "International Trade Agreements and International Migration," The World Economy, Wiley Blackwell, vol. 33(12), pages 1923-1954, December.
    23. 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.
    24. Gil Epstein, 2009. "Willingness to Assimilate and Ethnicity," Nordic Journal of Political Economy, Nordic Journal of Political Economy, vol. 35, pages 1-1.

    More about this item

    Keywords

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

    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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