Expatriates and Trade

Using unique cross-sectional data on international bilateral migration stocks, I evaluate the contribution to bilateral trade of expatriates from the OECD countries living in less developed economies, and of immigrants from less developed economies located within the OECD. The expatriates' role in trade differs both quantitatively and qualitatively from the role of immigrants. A 10% increase in the size of expatriate community leads to a 0.6% average increase in its OECD country-of-origin imports, as compared to a notably stronger 2.5% impact of immigrants into the OECD countries. Furthermore, unlike in the case of immigrants located within the OECD, the estimates on expatriates' role in exports are not statistically different from zero. The imports-facilitating role of expatriates' networks is centered in host countries with low institutional quality. In economies lying within the lowest third of the institutional quality distribution, a 10% increase in expatriate stock would lead to a 1.7% increase in imports into their country of origin. The study further addresses the hypothesis that bilateral immigrant-driven trade gains might be offset by lower trade volumes with other trade partners. The estimates suggest that despite the consistency with offsetting immigrant-driven shifts in trade flows, the overall net effect of immigrant networks on aggregate trade is still non-negative.