Immigrant-Trade Links: Empirical Evidence from Sweden

Sammanfattning: Previous research suggests that immigrants can promote trade by lowering transaction costs, and by bringing with them preferences for goods produced in their native country. This paper examines the hypothesis that there is a positive relation between the number of immigrants from a given country and Swedish bilateral trade flows with that country. It further examines if the immigrant-trade link is stronger the more socially and/or institutionally dissimilar Sweden is to its trade partners. The present study is, to the best of our knowledge, the first to examine the immigrant-trade link using Swedish data. Cross-sectional OLS and fixed effects specifications have been utilised within the framework of an augmented gravity model of trade. The data sample includes an average of over 140 countries for the period of 1975 to 2005. Results suggest that larger immigrant stocks are associated with higher trade flows: a 10% increase in the number of immigrants will on average increase Swedish exports by 2.16%, while imports will increase with 2.68%, given that all other model variables are held constant. No results indicating that social and/or institutional dissimilarity increases immigrant-trade links were found.