How migrant networks facilitate trade: Evidence from Swiss exports

Abstract

Summary This paper uses Swiss immigration data and two novel instrumental variables to test the channels through which migrants promote trade. Using the immigrant stock in France as well as Swiss visa restrictions as instruments for the immigrant stock in Switzerland, I am able to exploit the cross-sectional nature of the data and identify a causal protrade effect. I find robust evidence of a protrade effect that takes place entirely on the extensive margin, i.e. on the number of exported products rather than the value of exports. This suggests migrant networks reduce beachhead costs. I also find that migrants can act as substitute for formal institutions, but not so for goods sold on organised markets. This suggests either that differentiated products are not only search- but also trust-intensive or that migrants substitute for institutions by providing information rather than trust.

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