Do foreign workers reduce trade barriers? Microeconomic evidence

Andrews, Martyn; Schank, Thorsten; Upward, Richard

Abstract

This paper provides evidence that foreign workers reduce firms' trade costs and thus increase the probability that firms export. This informs both the literature on trade costs and the microeconomic literature on firms' export behaviour. We identify the nationality of each worker in a large sample of German establishments, and relate this to the exporting behaviour of these establishments. We allow for the possible endogeneity of an establishment's workforce by instrumenting the share of foreign workers with the regional distribution of foreign workers in the wider labour market. We find a significant effect of worker nationality on exporting which is not driven by the industrial, occupational or locational concentration of migrants. The effect is much stronger for senior occupations, who are more likely to have a role in exporting decisions by the establishment. The relationship is also stronger when we consider exports to particular regions and workers from these regions, consistent with a gravity model in which trade flows from country i to j are a function of migrants from j in i.

Citation

Andrews, M., Schank, T., & Upward, R. (2017). Do foreign workers reduce trade barriers? Microeconomic evidence. World Economy, 40(9), 1750-1774. https://doi.org/10.1111/twec.12486

• Journal Article Type: Article
• Acceptance Date: Nov 29, 2016
• Online Publication Date: Feb 27, 2017
• Publication Date: Sep 11, 2017
• Deposit Date: Jan 4, 2017
• Publicly Available Date: Feb 28, 2019
• Journal: The World Economy
• Print ISSN: 0378-5920
• Electronic ISSN: 1467-9701
• Publisher: Wiley
• Peer Reviewed: Peer Reviewed
• Volume: 40
• Issue: 9
• Pages: 1750-1774
• DOI: https://doi.org/10.1111/twec.12486
• Keywords: International migration; Trade barriers; Exports; Employer-employee data; Firm-level analysis
• Public URL: https://nottingham-repository.worktribe.com/output/881700
• Publisher URL: http://onlinelibrary.wiley.com/doi/10.1111/twec.12486/full
• Additional Information: This is the peer reviewed version of the following article: Andrews M, Schank T, Upward R. Do foreign workers reduce trade barriers? Microeconomic evidence. World Econ. 2017;40:1750–1774. https://doi.org/10.1111/twec.12486 which has been published in final form at http://onlinelibrary.wiley.com/doi/10.1111/twec.12486/full This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving.
• Contract Date: Jan 4, 2017