The Trade Creation Effect of Immigrants: Evidence from the Remarkable Case of Spain

Giovanni Peri, Francisco Requena

NBER Working Paper No. 15625
Issued in December 2009
NBER Program(s):   ITI   LS

There is abundant evidence that immigrant networks are associated with larger exports from the country where they settle to their countries of origin. The direction of causality of this association is less clearly established. Also, we do not know to what extent these increased exports are due to an increase in the number of exporting firms (i.e. the extensive margin of trade) or due to larger values exported by existing firm (i.e. the intensive margin). Using micro data on individual trade transactions from Spanish provinces between 1995 and 2008 and data on the stock of immigrants in those provinces by country of origin we can make progress on both fronts. The richness of our data allows us to control for a large set of fixed effects and to use an instrumental variable strategy to isolate the export creation effect of new immigrants. We are also able to quantify the impact of immigrants on the intensive and extensive margin of trade and how it varies between homogeneous, moderately differentiated and differentiated goods. Our findings can be interpreted, in the light of the Chaney (2008) gravity model, as consistent with the idea that immigrants reduce the fixed costs of trade. As implied by a decrease in fixed trade costs in that model we find that immigrants significantly increase exports (elasticity of 0.10), that the effect is almost entirely due to an increase in the extensive margin and that the effect is somewhat stronger for differentiated goods.

download in pdf format
   (286 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w15625

Published: Giovanni Peri & Francisco Requena-Silvente, 2010. "The trade creation effect of immigrants: evidence from the remarkable case of Spain," Canadian Journal of Economics, Canadian Economics Association, vol. 43(4), pages 1433-1459, November. citation courtesy of

Users who downloaded this paper also downloaded these:
Peri w15507 The Effect of Immigration on Productivity: Evidence from US States
Abramitzky, Boustan, and Eriksson w15684 Europe's tired, poor, huddled masses: Self-selection and economic outcomes in the age of mass migration
Arkolakis, Costinot, and Rodríguez-Clare w15628 New Trade Models, Same Old Gains?
Ramondo and Rodríguez-Clare w15604 Trade, Multinational Production, and the Gains from Openness
Borjas, Freeman, and Katz On the Labor Market Effects of Immigration and Trade
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us