Do immigrants reduce bilateral trade costs? An empirical test

B. Tadesse, R. White

Research output: Contribution to journalArticlepeer-review

3 Scopus citations

Abstract

We use the first comprehensive estimates of bilateral trade costs to test the extensively stated, but rarely evaluated, hypothesis that immigrants reduce trade-related transaction costs. Our results provide robust and direct evidence supporting this often-posited hypothesis. We examine the period from 1995 through 2010 using data that represent 174 im-migrant home countries and 19 OECD member host countries. We find that a 10% increase in the stock of immigrants from a given home country that reside in a given host country corresponds with a 1.04% decrease in the overall bilateral trade costs between the home and host countries. While different in magnitudes, we also find that the effect of immigrants, in reducing trade costs, persists across both manufactured and agricultural products.

Original languageEnglish (US)
Pages (from-to)1127-1132
Number of pages6
JournalApplied Economics Letters
Volume22
Issue number14
DOIs
StatePublished - Sep 22 2015

Bibliographical note

Publisher Copyright:
© 2015 Taylor & Francis.

Keywords

  • gravity model
  • immigrants
  • trade costs

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