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Immigrant Networks and U.S. Bilateral Trade: The Role of Immigrant Income

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  • Mundra, Kusum

    (Rutgers University)

Abstract

This paper examines the role of immigrant networks on trade, particularly through the demand effect. First, we examine the effect of immigration on trade when the immigrants consume more of the goods that are abundant in their home country than the natives in a standard Heckscher-Ohlin model and find that the effect of immigration on trade is a priori indeterminate. Our econometric gravity model consists of 63 major trading and immigrant sending countries for the U.S. over 1991-2000. We find that the immigrants' income, mostly through the demand effect, has a significant negative effect on U.S. imports. However, if we include the effect of the immigrant income interacted with the size of the immigrant network, measured by the immigrant stock, we find that the higher the immigrant income the lower is the immigrant network effect for both U.S. exports and imports. This we find in addition to the immigrant stock elasticity of 0.27% for U.S. exports and 0.48% for U.S. imports. Capturing the immigrant assimilation with the level of immigrant income, this paper finds that the immigrant network effect on trade flows is weakened by the increasing level of immigrant assimilation.

Suggested Citation

  • Mundra, Kusum, 2010. "Immigrant Networks and U.S. Bilateral Trade: The Role of Immigrant Income," IZA Discussion Papers 5237, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp5237
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    References listed on IDEAS

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    1. Paul W. Miller & Barry R. Chiswick, 2002. "Immigrant earnings: Language skills, linguistic concentrations and the business cycle," Journal of Population Economics, Springer;European Society for Population Economics, vol. 15(1), pages 31-57.
    2. Gould, David M, 1994. "Immigrant Links to the Home Country: Empirical Implications for U.S. Bilateral Trade Flows," The Review of Economics and Statistics, MIT Press, vol. 76(2), pages 302-316, May.
    3. Chiswick, Barry R & Miller, Paul M, 1996. "Ethnic Networks and Language Proficiency among Immigrants," Journal of Population Economics, Springer;European Society for Population Economics, vol. 9(1), pages 19-35, February.
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    Cited by:

    1. Amit Chandna, 2014. "India’s Foreign Trade with China Since Economic Reforms in India," Journal of Commerce and Trade, Society for Advanced Management Studies, vol. 9(1), pages 89-98, April.
    2. Cuadros, Ana & Martín-Montaner, Joan & Paniagua, Jordi, 2019. "Migration and FDI: The role of job skills," International Review of Economics & Finance, Elsevier, vol. 59(C), pages 318-332.

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    More about this item

    Keywords

    immigrant networks; immigrant assimilation; demand effect; trade;
    All these keywords.

    JEL classification:

    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • J10 - Labor and Demographic Economics - - Demographic Economics - - - General

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