Isolating the Network Effect of Immigrants on Trade

Within the migration-trade nexus literature, this paper proposes a more carefully defined measure of migration business networks, and quantifies its impact on bilateral trade. Controlling for the overall bilateral stock of migrants, the share of migrants employed in managerial/business-related occupations has a strong additional effect on trade, and especially on exports. Those immigrants should be the ones directly involved in the diffusion of relevant information for trading companies. Their presence, more than the presence of immigrants overall, or of highly educated immigrants, is found to enhance trade. When we control for the presence of highly educated immigrants, the share of immigrants in business network occupations shows a particularly large effect on trade in differentiated goods. Specifically, we find that highly educated individuals in business-related occupations are those enhancing export by the largest margin. Business network effect is particularly important for culturally different countries, such as the ones with different legal origin.