The Export Promoting Effect of Emigration: Evidence from Denmark

Ethnic networks exhibit the potential to lower barriers to trade. The paper identifies the export-promoting effect of emigration on the firm-level using Danish data for the year 2001. Accounting for taste similarity, self-selection and unobserved heterogeneity, three main findings are established. First, the elasticity of manufacturing exports to emigration is robust and of similar size as the effect of immigration. Secondly, only immigration encourages market entry but not emigration, suggesting that variable cost reductions and demand for home-country products are the driving force of emigrant network effects. Thirdly, benefits from emigration accrue exclusively to low-productivity firms.