because migrants possess economic, cultural and institutional knowledge about both the home and the host markets, they are able to mediate economic exchange between those markets, thus increasing trade above what it would be in the absence of such migration . In this case, migrants engage in market creation. Because such information problems are expected to be more severe for differentiated products, we would expect to find strong positive effects for trade in such products, especially between countries with very different economic, cultural and political environments. Arguably, once such a bridge has been constructed, the need for additional migrants might well be expected to decline. Immigration increases trade – increased demand for new consumer products Gaston and Nelson 2011 – President of Global Development Centre and Professor of Economics at Murphy Institute [Noel and Douglas, “Bridging Trade Theory And Labour Econometrics: The Effects Of International Migration,” Journal of Economic Surveys (2013), June 23, 2011, - 6419.2011.00696.x/pdf, Accessed July 17, 2013] Before turning to a discussion of the empirical work on the role of immigrant networks in reducing trade costs, we should note that, in addition to the role of networks, the most straightforward way that immigrant differences might affect trade patterns runs through preferences – immigrants may have a preference for their own goods that they bring with them when they emigrate. 20 Not only does this have a direct effect on demand for the immigrant-preferred goods, but
we would also expect that demonstration effects would increase the demand for these goods among natives as well. Given that non-immigrants from a given country (i.e. natives and immigrants from other countries) will generally dramatically outnumber immigrants from a given country, we might expect the indirect effect to be larger than the direct effect. It is conventional in the empirical literature to assert that taste effects should affect only imports, and among imports only consumer goods. Although this may be a plausible approximation, it is surely the case that information gleaned by immigrants from consuming in the host country can be transferred to the home country in a variety of ways. Thus, the common inference in the gravity literature that a positive estimated effect of immigrant stock on imports is evidence of a preference effect, whereas a positive effect on exports is evidence of network effects, seems less than strong. By contrast, the presumption that the preference effect should be seen in consumer goods seems quite well founded . In either case, when evaluating the link between immigration and trade, we surely need to account for the effect of differences in preferences between immigrants and natives.
- Fall '16
- jane smith
- Immigration to the United States