Migrants, regulations, and trade

Abstract

Existing evidence indicates that immigration helps to overcome informal barriers to trade, but little is known about whether this effect holds for trade frictions coming from importing countries’ regulations. This paper investigates the impact that immigration has on exporting, by using transaction-level data between all Spanish provinces and every country in the world. We present evidence that migrants (1) increase the number of shipments and (2) reduce the average value per shipment. Our main contribution is to show that the first effect is driven mostly by formal institutions, via contract enforcement procedures, and by administrative barriers to trade. We find that the second effect is independent of the importing country’s regulations. Both of these findings suggest that migration has an impact on trade beyond informal channels and imply that formal and informal institutions interact and affect trade through different margins.