Publication Date

2010

Document Type

Book Chapter

Abstract

Employing a variant of the standard gravity equation and data from nine OECD immigrant host countries and 67 trading partners for the years 1996-2001, we examine the immigrant-trade relationship. Particular emphasis is placed on the potential influences of host country cultural diversity and host-home cultural distance. Data from the World Values Surveys and the European Values Surveys are used to calculate the cultural distances between immigrants’ host and home countries. Cultural distance is taken to be a proxy measure for the extent to which immigrants’ host countries are culturally divergent from their home countries. To estimate the cultural diversity of each host country’s population during our reference period, we calculate Simpson Index of Diversity values. We find that greater cultural differences inhibit both host country imports and exports, with imports seemingly affected to a greater extent. We also observe that immigrants increase trade flows, perhaps by exploiting superior information regarding host country markets (relative to their home country counterparts) and home country markets (relative to their host country counterparts) and/or by acting as conduits that bridge cultural differences between their host and home countries. Greater cultural diversity within the host country population is found to be positively correlated with the estimated proportional influences of immigrants on trade. Our findings imply that immigrants play greater roles in facilitating international trade than is generally discussed in the literature: fully or partially offsetting the influences of the lack of trust and commitments that may correspond with greater cultural differences between potential trading partners.

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