Migration and Servicification: Do Immigrant Employees Spur Firm Exports of Services?

Many countries display remarkably high dependence on services for production and employment that is incommensurate with their level of services exports. One explanation is that trade in services is more sensitive to informal and behind-the-border trade barriers such as information friction and inadequate access to foreign networks. Immigrant employees may provide access to and appeal in foreign markets through their knowledge of—and contacts in—their former home countries. We develop a heterogeneous firm framework to guide our empirical analysis and draw on new employer-employee data for nearly 30,000 Swedish firms during the period 1998-2007. The results suggest that immigrant employees facilitate services exports. Hiring one additional foreign-born worker can increase services exports by approximately 2.5 percent, on average, with a stronger effect found for skilled and newly arrived immigrants.