Abstract

The cost of international trade matters. As traditional barriers to trade continue to diminish in importance, additional ways to lower trade costs become increasingly important to promoting international trade. Migrants can help lower trade costs between their country of birth and their country of residence by providing an information channel that reduces friction and facilitates trade relations. This paper applies a gravity model to a large set of data about developed and developing countries to estimate the extent of the relationship between migrants and trade. The results suggest that both immigrants and emigrants are significantly related to higher trade volumes. Immigrants seem to be especially good at facilitating trade in differentiated goods, for which information costs are particularly important.