Immigration and Trade Creation: Econometric Evidence from Canada

TLDR

Immigrants may expand trade with their country of origin, owing to superior knowledge of or preferential access to market opportunities. The study tests whether immigrants expand trade with their country of origin. The authors analyze Canadian trade data with 136 partners from 1980 to 1992 using an augmented gravity model. A 10 % increase in immigrants raises Canadian exports to the immigrant’s home country by 1 % and imports by 3 %; among immigrant categories, independents have the greatest trade influence, while the entrepreneur class has less impact than all other classes except refugees.

Abstract

Immigrants may expand trade with their country of origin, owing to superior knowledge of, or preferential access to, market opportunities. The authors test this proposition using Canadian trade data with 136 partners from 1980 to 1992. In an augmented gravity equation, they find that a 10 percent increase in immigrants is associated with a 1 percent increase in Canadian exports to the immigrant's home country and a 3 percent increase in imports. They also find that, among the primary categories of immigrants, independents have the greater influence on trade. Immigration via the entrepreneur class appears to have less impact on trade than all other classes except refugees.