Expatriates and Trade

The study quantifies the contribution to bilateral trade flows of expatriates from the OECD economies living in less developed countries. Similarly to the results of the existing research that focused on immigrants moving in the opposite direction, the expatriates promote trade between the country of origin and country of residence. The expatriates’ facilitation of trade is nonetheless relatively weaker and works likely through different channels. Using a unique dataset on bilateral migration stocks, a 10 percent increase in the size of an expatriate community leads to a 0.6 percent average increase in its OECD trade partner’s imports against a 2.5 percent impact of immigrants in OECD countries. The import facilitating role of expatriate networks is centered in host countries with low institutional quality. In economies lying within the lowest third of the institutional quality distribution, a 10 percent increase in expatriate stock would lead to a 1.7 percent increase in imports into their country of origin. The figures on expatriates’ role in exports are not statistically different from zero.