Does Immigration Stimulate International Trade? Measuring the Channels of Influence

Abstract

This article examines the relationship between immigration and international trade. It applies panel data in a simultaneous equation regression model to test six channels through which immigration is hypothesized to influence international trade. The results indicate that immigration stimulates bi-lateral trade between 16 OECD countries and a large set of immigrant source countries for the years 1991–2000 primarily by1. increasing foreign direct investment flows back to the source countries, 2. creating trade networks between immigrants in destination and native countries, and 3. raising income in immigrant destination countries.

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