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Immigrant Networks And The U.S. Bilateral Trade: The Role Of Immigrant Income

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Executive Summary

This paper examines the role of immigrant networks on trade, particulalry through the demand effect. First, the authors examine the effect of immigration on trade when the immigrants consume more of the goods that are abundant in their home country than the natives in a standard Heckscher-Ohlin model and find that the effect of immigration on trade is a priori indeterminate. The econometric gravity model consists of 63 major trading and immigrant sending countries for the U.S. over 1991 - 2000. They find that the immigrants income, mostly through demand effect, has a significant negative effect on the U.S. imports.

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