Do foreign workers reduce trade barriers? Microeconomic evidence

This paper provides evidence that foreign workers reduce ?rms’ trade costs and thus increase the probability that ?rms export. This informs both the literature on trade costs and the microeconomic literature on ?rms’ export behaviour. We identify the nationality of each worker in a large sample of German establishments, and relate this to the exporting behaviour of these establishments. We allow for the possible endogeneity of an establishment’s workforce by instrumenting the share of foreign workers with the regional distribution of foreign workers in the wider labour market. We ?nd a signi?cant e?ect of worker nationality on exporting which is not driven by the industrial, occupational or locational concentration of migrants. The e?ect is much stronger for senior occupations, who are more likely to have a role in exporting decisions by the establishment. The relationship is also stronger when we consider exports to particular regions and workers from these regions, consistent with a gravity model in which trade ?ows from country i to j are a function of migrants from j in i.