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The sectoral pro-trade effects of ethnic networks within a Ricardian model of trade

  • Mauro Lanati
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    This paper investigates the trade migration link within a Ricardian model` a la Eaton and Kortum (2002) and it quantifies the pro-trade effects of immigrants for 18 manufactur- ing sectors in a sample of 19 OECD countries. The results are robust across different econometric specifications and they indicate pulp, paper, paper products, printing and publishing as the sector where immigration has the greatest impact on trade. The analy- sis shows that accounting for ethnic networks in the trade share equation has important implications for the estimation of trade cost elasticity parameter across all manufacturing sectors. By following a two-step approach to estimate trade cost elasticity at sector level where q is proportional to the effect of wages on exporter fixed effects, I find that in total manufacturing q decreases by 1.03 when ethnic networks are included among the determinants of trade. This drop of trade cost elasticity approximately corresponds - on average - to a welfare gain of 4.16% of national income.

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    File URL: http://www.ec.unipi.it/documents/Ricerca/papers/2014-179.pdf
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    Paper provided by Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy in its series Discussion Papers with number 2014/179.

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    Date of creation: 01 Mar 2014
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    Handle: RePEc:pie:dsedps:2014/179
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    1. James E. Rauch & Vitor Trindade, 1999. "Ethnic Chinese Networks in International Trade," NBER Working Papers 7189, National Bureau of Economic Research, Inc.
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    5. Andrew B Bernard & Jonathan Eaton & J. Bradford Jensen & Samuel Kortum, 2000. "Plants and productivity in international trade," Working Papers 00-08, Center for Economic Studies, U.S. Census Bureau.
    6. Christopher F Baum & Mark E. Schaffer & Steven Stillman, 2003. "Instrumental variables and GMM: Estimation and testing," Stata Journal, StataCorp LP, vol. 3(1), pages 1-31, March.
    7. Arnaud Costinot & Andres Rodriguez-Clare & Costas Arkolakis, 2010. "New Trade Models, Same Old Gains?," 2010 Meeting Papers 433, Society for Economic Dynamics.
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    10. Ana Cecília Fieler, 2011. "Nonhomotheticity and Bilateral Trade: Evidence and a Quantitative Explanation," Econometrica, Econometric Society, vol. 79(4), pages 1069-1101, 07.
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    15. Massimiliano Bratti & Luca de Benedictis & Gianluca Santoni, 2012. "On the Pro-Trade Effects of Immigrants," Development Working Papers 347, Centro Studi Luca d\'Agliano, University of Milano, revised 13 Nov 2012.
    16. Anthony Briant & Pierre-Philippe Combes & Miren Lafourcade, 2009. "Product Complexity, Quality Of Institutions And The Pro-Trade Effect Of Immigrants," PSE Working Papers halshs-00382510, HAL.
    17. Melitz, Marc J, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," CEPR Discussion Papers 3381, C.E.P.R. Discussion Papers.
    18. James E. Anderson, 2011. "The Gravity Model," Annual Review of Economics, Annual Reviews, vol. 3(1), pages 133-160, 09.
    19. Giovanni Peri & Francisco Requena-Silvente, 2010. "The trade creation effect of immigrants: evidence from the remarkable case of Spain," Canadian Journal of Economics, Canadian Economics Association, vol. 43(4), pages 1433-1459, November.
    20. Felbermayr, Gabriel J. & Toubal, Farid, 2012. "Revisiting the Trade-Migration Nexus: Evidence from New OECD Data," World Development, Elsevier, vol. 40(5), pages 928-937.
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    24. Jonathan Eaton & Samuel Kortum, 2002. "Technology, Geography, and Trade," Econometrica, Econometric Society, vol. 70(5), pages 1741-1779, September.
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