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N° 2009-30 |
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| December 2009 |
| Ethnic Networks, Information, and International Trade: Revisiting the Evidence |
Gabriel J. Felbermayr
Benjamin Jung
Farid Toubal |
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| Influential empirical work by Rauch and Trindade (REStat, 2002) finds that Chinese ethnic networks of
the magnitude observed in Southeast Asia increase bilateral trade by at least 60%. We argue that this
estimate is upward biased due to omitted variable bias. Moreover, it is partly related to a preference
effect rather than to enforcement and/or the availability of information. Applying a theory-based gravity
model to ethnicity data for 1980 and 1990, and focusing on pure network effects, we find that the Chinese
network leads to a more modest amount of trade creation of about 15%. Using new data on bilateral
stocks of migrants from the World Bank for the year of 2000, we extend the analysis to all potential
ethnic networks. We find, i.a., evidence for a Polish, a Turkish, a Mexican, or a Pakistani network.
While confirming the existence of a Chinese network, its trade creating potential is dwarfed by other
ethnic networks. The large heterogeneity in the trade-creating potential of different networks is, among
other things, explained by the share of high-skilled immigrants, the degree of ethnic fragmentation, and
GDP per capita. |
Non-technical summary  |
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Résumé
non-technique
en français |
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| Full text |
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| Gravity model; international trade; network effects; international migration |
Keywords |
| F12; F22 |
JEL classification |
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