The Role of Human Capital in Networks Effects: Evidence from US Exports

Abstract

Previous literature suggested that immigrants have a positive impact on international transactions such as exports. However, even though previous studies emphasize the role of individual and families in enhancing networks effects, none of these studies, surprisingly, have considered the heterogeneity of immigrants. Since each individual has different social and educational backgrounds, the impact of immigrants on exports may differ among individuals depending on their personal attributes. The main contribution of this paper is to go one step further in discussing the role of immigrants in enhancing host country exports. This research attempts to answer the question of whether all immigrants encourage host country exports or not. Using US state-level data, we find that the human capital level of immigrants plays an important role in enhancing US exports. Furthermore, using the data-sorting method developed by Hansen, we find that immigrants from countries with a high level of human capital increase US exports while immigrants from countries with a low level of human capital do not.