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Do immigrants reduce bilateral trade costs? An empirical test

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  • B. Tadesse
  • R. White

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.

Suggested Citation

  • B. Tadesse & R. White, 2015. "Do immigrants reduce bilateral trade costs? An empirical test," Applied Economics Letters, Taylor & Francis Journals, vol. 22(14), pages 1127-1132, September.
    • Handle: RePEc:taf:apeclt:v:22:y:2015:i:14:p:1127-1132
    DOI: 10.1080/13504851.2015.1008756
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    Cited by:

    1. Dezhong Duan & Qifan Xia, 2022. "From the United States to China? A trade perspective to reveal the structure and dynamics of global electronic‐telecommunications," Growth and Change, Wiley Blackwell, vol. 53(2), pages 823-847, June.
    2. Bedassa Tadesse & Roger White, 2019. "Economic integration agreements, immigrants and trade costs," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 155(2), pages 353-406, May.

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