Ethnic Networks And Trade: Intensive Vs. Extensive Margins
Ethnic networks - as proxies for information networks - have been associated with higher levels of international trade. Previous research has not differentiated between the roles of these networks on the extensive and intensive margins. The present paper does so using a model with fixed effects, finding that ethnic networks increase trade on the intensive margin but not on the extensive margin. Following Rauch (1999 and 2001), a literature has developed that looks at the effect of information networks on international trade. To date, empirical research on this question has not distinguished between the extensive margin (whether trade occurs) and intensive margins (the level of trade, given that trade already occurs).