Abstract
This paper investigates the trade migration link within a Ricardian model a la Eaton and Kortum (2002) and it quantifies the pro-trade effects of immigrants for 18 manufacturing sectors in a sample of 19 OECD countries. The results are robust across different econometric specifications and they indicate "pulp, paper, paper products, printing and publishing" as the sector where immigration has the greatest impact on trade. The analysis shows that accounting for ethnic networks in the trade share equation has important implications for the estimation of trade cost elasticity parameter across all manufacturing sectors. By following a two-step approach to estimate trade cost elasticity at sector level where "theta" is proportional to the effect of wages on exporter fixed effects, I find that in total manufacturing "theta" decreases by 1.03 when ethnic networks are included among the determinants of trade. This drop of trade cost elasticity approximately corresponds - on average - to a welfare gain of 4.16% of national income.
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