Assimilation and Trade between the Middle East, Europe, and North America

Abstract

How are immigration and trade related? Migration leads to the formation of social networks across borders, driving down trade costs. Immigrants may also retain a preference for their native country's products, creating a local market for exports. I examine these two competing theories by estimating the immigration-trade linkage separately for migrants moving from the Middle East and North Africa (MENA) to Europe and North America. While these two groups originate in the same location and have similar preferences, they are quite different in terms of both income and education, with migrants to North America tending to be less numerous but more educated. The greater degree of economic assimilation for North American migrants should strengthen migrant network effects, but greater cultural assimilation weakens both network and preference effects. I find the migration-trade link to be stronger for migrants to Europe, with the strongest effect for imports. The link is stronger for differentiated goods than for homogeneous goods and strongest for differentiated goods imports into Europe. These results suggest that while network effects matter, immigrant preferences for native country goods are the key factor driving the migration-trade link.