Overcoming non-tariff barriers to trade: the role of migrant - - PowerPoint PPT Presentation

Intro and literature Empirical approach Results Conclusion

Overcoming non-tariff barriers to trade: the role of migrant networks

Jos´ e L. Groizard and Joan Mart´ ın-Montaner

Universitat de les Illes Balears – Universitat Jaume I & IEI

Castell´

• n, September 26, 2019

Groizard & Mart´ ın-Montaner Migration and trade

Intro and literature Empirical approach Results Conclusion

Motivation

The relationship between migration and trade has been studied for so long Migrants’ contribution to exchange involve different causal mechanisms that remain unclear Pro-trade effect is likely motivated by the way ethnic networks solve information problems Causal inference requires convincing identification strategies to sort out endogeneity

trade relationships and migration decisions are potentially explained by common ‘unobserved’ shocks, and reverse causality

Groizard & Mart´ ın-Montaner Migration and trade

Intro and literature Empirical approach Results Conclusion

Idea

We study the causal effect of a large migration shock into Spain exploiting the distribution of foreign born population per country of birth across provinces on export extensive margin by local firms Fixed cost-per product and fixed cost per transaction are common trade barriers We test if ethnic networks reduce the burden of regulations on the extensive margin of trade Identification

Interaction between origin-specific push factors and destination-specific pull factors generates a quasi-random variation in the allocation of migrants across Spanish provinces (Burchardi et al, 2018)

We use migration inflows over two decades 1991-2011 to 50 provinces and from 179 foreign countries and transaction level export data from province to each foreign country in 2015

Groizard & Mart´ ın-Montaner Migration and trade

Intro and literature Empirical approach Results Conclusion

Literature

Affinity between regions (social ties, trust, common ancestry, etc) correlate strongly with aggregate outcomes such as trade flows (Gould, 1994), FDI (Guiso, Sapienza and Zingales, 2009) and international assets flows (Portes and Rey, 2005) Several papers have attempted to assess the causal impact of migrations

• n trade and FDI using instrumental variables: Javorcik et al. (2011) use

cost of acquiring a passport for the migration-FDI relationship; Cohen et

• al. (2015) use the location of Japanese internment camps during the

WWII to infer trade flows between locations within the US and Japan; Parsons and Vezina (2016) use the placement of Vietnamese refugees after the Vietnam War to infer trade flows with Vietnam Nevertheless, in the last two papers instrumenting for migration from one country makes impossible to control for destination fixed effects

Groizard & Mart´ ın-Montaner Migration and trade

Intro and literature Empirical approach Results Conclusion

Literature (cont’)

Peri and Requena-Silvente (2010) estimate a migration-trade causal effect for Spanish provinces relying on a Card (2001) instrument that might not be suitable in this context. Indicate strong extensive-margin effect of ethnic network Burchardi, Chaney and Hassan (2018) present a novel approach yielding a specific instrument for migrations from each origin to each destination at each point in time and allowing to control simultaneously for both origin and destination fixed effects Hornok and Koren (2015) and in Kropf and Saur´ e (2014) present theory and evidence of how administrative barriers to trade affect disproportionally the extensive margins of trade

Groizard & Mart´ ın-Montaner Migration and trade

Intro and literature Empirical approach Results Conclusion

Theory

Trade frictions are large especially for poor countries (Anderson and van Wincoop, 2004). Migrants may have a positive effect on trade costs because

its contribution to equalize preferences in consumption across countries they provide social collateral for contract enforcement, replacing weak institutions they reduce information frictions related to a country’s language, regulations, market opportunities and informal institutions

Similar mechanisms are established for FDI or international business

Groizard & Mart´ ın-Montaner Migration and trade

Intro and literature Empirical approach Results Conclusion Indentification Data

Model

Our goal is to estimate an equation like the following: To,d = αo + αd + δM2011

• ,d

+ X ′

• ,d + ǫo,d

(1) where To,d is a trade variable (i.e., exports) measuring either the number of transactions (shipments) or the number of products exported to the origin country, o from the destination region, d of migrants in the year 2015. Mo,d is a measure of the extent of the ethnic network residing in region d with origin in country o in 2011, measured as the log of 1 plus units of foreign born resident. X ′

• ,d is a vector of control variables normally included in the gravity-type
• f models, including the geographic distance between o and d, and

difference in latitude between o and d

Groizard & Mart´ ın-Montaner Migration and trade

Intro and literature Empirical approach Results Conclusion Indentification Data

Extended model

We include a new interaction variable to the model (1): To,d = αo + αd + δM2011

• ,d

+ γM2011

• ,d

× barriero + X ′

• ,d + ǫo,d (2)

where barriero is an indicator variable taking value 1 when country

• trade barrier is above world average

γ coefficient tests whether migration effect of trade is higher at the most regulated economies

Groizard & Mart´ ın-Montaner Migration and trade

Intro and literature Empirical approach Results Conclusion Indentification Data

Identification

The instrument is based on a dynamic equation of the form: Mt

• ,d = at + ao,t + ad,t + btMt−1
• ,d + I t
• ct

I t

d

It + dt Mt−1

• ,d

Mt−1

• + ηt
• ,d

(3) where the constant terms, at, ao,t, and ad,t control for residual forces, such as demographics, which may vary over time, over space, and between different ethnic groups. The term btMt−1

• ,d reflects the strength of the migration stock to

attract new migrants with the same origin and destination being bt the parameter that modulates this intensity. Io measures the push factor common to all migrants with the same origin entering into Spain between t and t − 1. ct

I t

d

It measures the the degree to which province o is particularly appealing to

• migrants. The fraction of migrants from country o who already lives in

province d, dt

Mt−1

• ,d

Mt−1

• , measures the strength migrant networks settle near other
• countrymen. Coefficients, ct and dt control for the relative importance of the

pull and recursive factors.

Groizard & Mart´ ın-Montaner Migration and trade

Intro and literature Empirical approach Results Conclusion Indentification Data

Measurement issues

1

Pull factor, I t

d

It where It = ∑50 d=1 I t d: measured as the fraction of migrants

coming from anywhere in the world who settle in d at between 2001 and 1991, excluding migrants from the same continent as o.

2

Push factor, I t

• : measured as the total number of residents living in Spain

that were born in o excluding migrants from o who settle in the same province as d between 2001 and 1991.

3

We compute the interaction of these pull and push factors going back to 1991 as our instrument: I t

• I t

d

It .

Groizard & Mart´ ın-Montaner Migration and trade

Intro and literature Empirical approach Results Conclusion Indentification Data

Data on migration

Migration data are constructed from the population censuses

• f 1991, 2001 and 2011

We count as immigrants the residents of the province d born in a foreign country o, Mt

• d

We calculate the net flows of immigration in the intercensal period 1991-2001, Io,d, as the difference between the stock of immigrants

Groizard & Mart´ ın-Montaner Migration and trade

Figure: Immigration by entry year in Census 2011

Intro and literature Empirical approach Results Conclusion Indentification Data

Migration main figures

Unlike migrations to the United States that date back to the 19th century, emigration to Spain is quantitatively a recent phenomenon Average foreign born residents at province-country pair (50–179) level went from 87 in 1991, to 653 in 2011 The wave of mass immigration to Spain has been a generalized shock in all provinces and from all origins

Groizard & Mart´ ın-Montaner Migration and trade

Figure: Immigration flows by province, 2001 to 2011 (darker colors denote higher migration inflows).

(a) Immigration flows by continent (b) Immigration flows by country (top 10)

Figure: Origins of immigrants to Spain, 2001-2011.

Intro and literature Empirical approach Results Conclusion Indentification Data

Trade Data

Trade data is from Agencia Tributaria file of the 2015 edition It contains information about each international shipment that has its

• rigin or destination in Spain

Recorded variables: date of shipment, product code, value and weight, countries of destination or origin and transit, and the details of the shipment, such as the form of transport, the ship’s flag and if the cargo is in a container Product classification is at eight-digit Combined Nomenclature We aggregate trade variables for each pair of province of origin of the shipment and the country of destination We obtain the following extensive margin trade indicators: the number of shipments and the number of products exported

Groizard & Mart´ ın-Montaner Migration and trade

(a) Value of exports (b) Number of products (c) Shipments (d) Value per shipment

Figure: Exports by province, 2015 (darker colors denote higher intensity).

Intro and literature Empirical approach Results Conclusion Indentification Data

Other Data

The bilateral control variables include distance and the difference between the latitude obtained from the GeoDist file prepared by CEPII We use detailed measures of administrative trade barriers elaborated by the Doing Business dataset by the World Bank referred to 2015 (Doing Business Report, 2016)

1

Documents: number of procedures to import

2

Cost: cost of procedures to import

We also extend our regulatory measures to contract enforcement indicators from the same source

1

Time: time to enforce contracts

2

Cost: cost of enforcing contracts

Groizard & Mart´ ın-Montaner Migration and trade

Table: Summary statistics

All Foreign born > 0 Panel A: Province-country pair Products 100 132 (309.9) (353.4) Shipments 2,097 2,788 (16,597.0) (19,251.8) Value of exports (in thousands Euro) 25,272 33,939 (169,598.0) (196,760.9) Foreign born, 2011 653 886 (4,488.2) (5,208.0) Foreign born, 2001 224 303 (1,795.8) (2,085.9) Foreign born, 1991 87 117 (667.0) (774.5) Migration inflows, 2001-2011 430 583 (3,044.8) (3,533.9) Migration inflows, 1991-2001 137 186 (1,441.9) (1,676.8) Distance (km) 6,152 5,422 (3,920.4) (3,475.0) Latitude Difference (degree) 26 24 (19.8) (19.7)

Note: The table displays means and standard deviations (in parenthesis).

Table: Summary statistics (cont.)

All Foreign born > 0 # Documents to import 7 7 (2.6) (2.6) Cost of import procedures 1,855 1,812 (1,563.5) (1,442.3) Enforcement time 647 651 (303.8) (309.5) Enforcement cost 33 31 (18.6) (17.1)

Note: The table displays means and standard deviations (in parenthesis).

Table: First-Stage

Log Foreign Born 2011 (1) (2) (3) (4) (5) (6) (7) I 1990s

• ,d

×

I 1990s

• ,d

I 1990s

• 0.0001***

0.0001*** 0.0001*** 0.0001*** 0.0001*** 0.0002*** (0.0000) (0.0000) (0.0000) (0.0000) (0.0000) (0.0000) I 1990s

• ,−r(d) ×

I 1990s

−c(o),d

I 1990s

−c(o)

0.0001*** (0.0000) Log of Distance –0.0925 –0.0480 –0.0409 –0.0871 –0.1388 –0.1183 –0.0984 (0.1032) (0.1917) (0.2613) (0.1306) (0.1082) (0.1033) (0.1011) Latitude difference 0.0129*** 0.0212*** 0.0279*** 0.0097** 0.0033 0.0136*** 0.0134*** (0.0033) (0.0064) (0.0098) (0.0049) (0.0026) (0.0033) (0.0033) Kleibergen Wald rk statistic 30.367 31.665 24.495 26.346 43.819 34.506 21.406 Stock-Yogo 5% critical values 16.38 16.38 16.38 16.38 16.38 16.38 16.38 Stock-Yogo 10% critical values 8.96 8.96 8.96 8.96 8.96 8.96 8.96 R2 0.71 0.85 0.87 0.77 0.71 0.73 0.71 N 9,100 8,918 7,826 9,100 7,800 8,918 9,100 Destination FE Yes Yes Yes Yes Yes Yes Yes Origin FE Yes Yes Yes Yes Yes Yes Yes Origin × NUTS1-region No Yes No No No No No Origin × NUTS2-region No No Yes No No No No Destination × Continent FE No No No Yes No No No Excluding-EU No No No No Yes No No Excluding-Madrid No No No No No Yes No Restricted instrument No No No No No No Yes

Table: Number of shipments

Log Number of Shipments (1) (2) (3) (4) (5) (6) (7) PANEL A: IV Log Foreign Born 2011 0.207** 0.289*** 0.342*** 0.229** 0.269*** 0.192*** 0.174* (0.082) (0.105) (0.112) (0.093) (0.094) (0.065) (0.089) Log of Distance

• 1.659***
• 0.934***
• 0.895**
• 1.376***
• 2.005***
• 1.667***
• 1.661***

(0.241) (0.221) (0.453) (0.217) (0.332) (0.241) (0.241) Latitude difference

• 0.004

0.022

• 0.021

0.012

• 0.008
• 0.003
• 0.004

(0.009) (0.015) (0.037) (0.014) (0.012) (0.009) (0.009) N 9100 8918 7826 9100 7800 8918 9100 PANEL B: OLS Log Foreign Born 2011 0.406*** 0.437*** 0.498*** 1.631*** 0.514*** 0.412*** 0.406*** (0.057) (0.062) (0.072) (0.260) (0.075) (0.058) (0.057) Log of Distance

• 1.646***
• 0.934***
• 0.891*
• 1.387***
• 1.981***
• 1.653***
• 1.646***

(0.245) (0.227) (0.460) (0.429) (0.341) (0.245) (0.245) Latitude difference

• 0.007

0.019

• 0.026

0.026

• 0.008
• 0.006
• 0.007

(0.009) (0.016) (0.038) (0.016) (0.012) (0.009) (0.009) N 9100 8918 7826 9100 7800 8918 9100 Destination FE Yes Yes Yes Yes Yes Yes Yes Origin FE Yes Yes Yes Yes Yes Yes Yes Origin × NUTS1-region No Yes No No No No No Origin × NUTS2-region No No Yes No No No No Destination × Continent FE No No No Yes No No No Excluding-EU No No No No Yes No No Excluding-Madrid No No No No No Yes No Restricted instrument No No No No No No Yes

Table: Number of products

Log Number of Exported Products (1) (2) (3) (4) (5) (6) (7) PANEL A: IV Log Foreign Born 2011 0.068 0.079* 0.067* 0.032 0.106** 0.080** 0.048 (0.042) (0.044) (0.040) (0.059) (0.047) (0.037) (0.047) Log of Distance

• 1.326***
• 0.857***
• 0.871***
• 1.209***
• 1.649***
• 1.330***
• 1.327***

(0.180) (0.146) (0.303) (0.175) (0.243) (0.180) (0.180) Latitude difference 0.007 0.031***

• 0.011

0.014

• 0.001

0.008 0.008 (0.006) (0.009) (0.022) (0.009) (0.007) (0.006) (0.006) N 9100 8918 7826 9100 7800 8918 9100 PANEL B: OLS Log Foreign Born 2011 0.278*** 0.289*** 0.298*** 1.131*** 0.345*** 0.301*** 0.278*** (0.040) (0.042) (0.046) (0.178) (0.052) (0.042) (0.040) Log of Distance

• 1.313***
• 0.858***
• 0.865***
• 1.035***
• 1.626***
• 1.316***
• 1.313***

(0.181) (0.139) (0.310) (0.294) (0.249) (0.181) (0.181) Latitude difference 0.005 0.027***

• 0.018

0.019*

• 0.002

0.005 0.005 (0.006) (0.009) (0.023) (0.011) (0.007) (0.006) (0.006) N 9100 8918 7826 9100 7800 8918 9100 Destination FE Yes Yes Yes Yes Yes Yes Yes Origin FE Yes Yes Yes Yes Yes Yes Yes Origin × NUTS1-region No Yes No No No No No Origin × NUTS2-region No No Yes No No No No Destination × Continent FE No No No Yes No No No Excluding-EU No No No No Yes No No Excluding-Madrid No No No No No Yes No Restricted instrument No No No No No No Yes

Intro and literature Empirical approach Results Conclusion Channels of influence

Reconciling theory and evidence

Evidence indicates that ethnic networks facilitate firms trade adjustment through the extensive margin by changing the number of products and/or the number of shipments This is consistent with the hypothesis that migrants reduce information frictions that impede trade (i.e., Burchardi et al. (2018) find similar evidence for FDI) Relevant trade barriers are likely product–shipment specific fixed costs, as in Hornok and Koren (2015) or in Kropf and Saur´ e (2014) We test this hypothesis using data of administrative barriers to trade from the Doing Business Report

Groizard & Mart´ ın-Montaner Migration and trade

Intro and literature Empirical approach Results Conclusion Channels of influence

Reconciling theory and evidence (cont’)

Doing Business provides measures for the time and cost (excluding tariffs) associated with three sets of procedures -border compliance, documentary compliance and domestic transport- within the overall process of exporting and importing a shipment of

• goods. E.g., border compliance:

1 Includes the following items: (a) hire a custom broker, (b)

conduct a pre-shipment inspection by customs, (c) process the import declaration, (d) complete documents check, scanning/weighing and physical inspection by customs, (d) pay customs administrative fees, (e) any additional procedure

2 Procedures conducted by agencies other than customs: any

kind of technical, pre-shipment or security inspection

Groizard & Mart´ ın-Montaner Migration and trade

Table: Number of shipments and documents to import

Log Shipments (1) (2) (3) (4) (5) (6) (7) Log Foreign Born 2011 0.193** 0.287*** 0.341*** 0.233** 0.257*** 0.182*** 0.158* (0.085) (0.108) (0.116) (0.093) (0.096) (0.064) (0.090) × # Documents to import 0.213** 0.023 0.012 0.056 0.137 0.121 0.219* (0.099) (0.181) (0.183) (0.092) (0.110) (0.122) (0.111) Kleibergen Wald rk statistic 21.094 21.620 16.506 21.523 47.612 25.300 13.423 Stock-Yogo 5% critical values 7.03 7.03 7.03 7.03 7.03 7.03 7.03 Stock-Yogo 10% critical values 4.58 4.58 4.58 4.58 4.58 4.58 4.58 R2 0.86 0.89 0.90 0.89 0.83 0.86 0.86 N 9,100 8,918 7,826 9,100 7,800 8,918 9,100 Destination FE Yes Yes Yes Yes Yes Yes Yes Origin FE Yes Yes Yes Yes Yes Yes Yes Origin × NUTS1-region No Yes No No No No No Origin × NUTS2-region No No Yes No No No No Destination × Continent FE No No No Yes No No No Excluding-EU No No No No Yes No No Excluding-Madrid No No No No No Yes No Restricted instrument No No No No No No Yes

Table: Number of shipments and cost of import procedures

Log Shipments (1) (2) (3) (4) (5) (6) (7) Log Foreign Born 2011 0.134* 0.218*** 0.256*** 0.201** 0.200** 0.142*** 0.096 (0.080) (0.074) (0.071) (0.087) (0.091) (0.055) (0.080) × Cost of import procedures 0.301*** 0.304* 0.339** 0.250** 0.237*** 0.207*** 0.313*** (0.068) (0.158) (0.168) (0.100) (0.079) (0.066) (0.072) Kleibergen Wald rk statistic 12.711 14.429 10.300 9.009 24.660 15.770 8.663 Stock-Yogo 5% critical values 7.03 7.03 7.03 7.03 7.03 7.03 7.03 Stock-Yogo 10% critical values 4.58 4.58 4.58 4.58 4.58 4.58 4.58 R2 0.86 0.89 0.90 0.89 0.83 0.86 0.86 N 9,100 8,918 7,826 9,100 7,800 8,918 9,100 Destination FE Yes Yes Yes Yes Yes Yes Yes Origin FE Yes Yes Yes Yes Yes Yes Yes Origin × NUTS1-region No Yes No No No No No Origin × NUTS2-region No No Yes No No No No Destination × Continent FE No No No Yes No No No Excluding-EU No No No No Yes No No Excluding-Madrid No No No No No Yes No Restricted instrument No No No No No No Yes

Table: Number of shipments and time of enforcing contracts

Log Shipments (1) (2) (3) (4) (5) (6) (7) Log Foreign Born 2011 0.153* 0.240*** 0.289*** 0.198** 0.212** 0.167*** 0.118 (0.079) (0.079) (0.078) (0.085) (0.092) (0.059) (0.081) × Enforcement time 0.226*** 0.213 0.211 0.254*** 0.209*** 0.107 0.237*** (0.078) (0.163) (0.177) (0.086) (0.079) (0.070) (0.079) Kleibergen Wald rk statistic 14.302 15.298 12.745 7.099 8.872 11.188 11.175 Stock-Yogo 5% critical values 7.03 7.03 7.03 7.03 7.03 7.03 7.03 Stock-Yogo 10% critical values 4.58 4.58 4.58 4.58 4.58 4.58 4.58 R2 0.86 0.89 0.90 0.89 0.83 0.86 0.86 N 9,100 8,918 7,826 9,100 7,800 8,918 9,100 Destination FE Yes Yes Yes Yes Yes Yes Yes Origin FE Yes Yes Yes Yes Yes Yes Yes Origin × NUTS1-region No Yes No No No No No Origin × NUTS2-region No No Yes No No No No Destination × Continent FE No No No Yes No No No Excluding-EU No No No No Yes No No Excluding-Madrid No No No No No Yes No Restricted instrument No No No No No No Yes

Table: Number of shipments and cost of enforcing contracts

Log Shipments (1) (2) (3) (4) (5) (6) (7) Log Foreign Born 2011 0.142* 0.228*** 0.273*** 0.170** 0.204** 0.141*** 0.101 (0.083) (0.078) (0.074) (0.079) (0.093) (0.053) (0.081) × Enforcement cost 0.223** 0.214 0.223 0.203** 0.213*** 0.187*** 0.244*** (0.088) (0.161) (0.179) (0.084) (0.081) (0.069) (0.093) Kleibergen Wald rk statistic 13.668 15.034 10.636 13.345 23.396 17.019 8.471 Stock-Yogo 5% critical values 7.03 7.03 7.03 7.03 7.03 7.03 7.03 Stock-Yogo 10% critical values 4.58 4.58 4.58 4.58 4.58 4.58 4.58 R2 0.86 0.89 0.90 0.89 0.83 0.86 0.86 N 9,100 8,918 7,826 9,100 7,800 8,918 9,100 Destination FE Yes Yes Yes Yes Yes Yes Yes Origin FE Yes Yes Yes Yes Yes Yes Yes Origin × NUTS1-region No Yes No No No No No Origin × NUTS2-region No No Yes No No No No Destination × Continent FE No No No Yes No No No Excluding-EU No No No No Yes No No Excluding-Madrid No No No No No Yes No Restricted instrument No No No No No No Yes

Table: Number of products and documents to import

Log Products (1) (2) (3) (4) (5) (6) (7) Log Foreign Born 2011 0.056 0.070 0.058 0.042 0.091** 0.067* 0.034 (0.041) (0.044) (0.040) (0.062) (0.045) (0.036) (0.045) × # Documents to import 0.189*** 0.138** 0.127*** 0.147** 0.174*** 0.163*** 0.193*** (0.042) (0.053) (0.045) (0.063) (0.047) (0.050) (0.045) Kleibergen Wald rk statistic 21.094 21.620 16.506 21.523 47.612 25.300 13.423 Stock-Yogo 5% critical values 7.03 7.03 7.03 7.03 7.03 7.03 7.03 Stock-Yogo 10% critical values 4.58 4.58 4.58 4.58 4.58 4.58 4.58 R2 0.88 0.90 0.92 0.90 0.86 0.87 0.88 N 9,100 8,918 7,826 9,100 7,800 8,918 9,100 Destination FE Yes Yes Yes Yes Yes Yes Yes Origin FE Yes Yes Yes Yes Yes Yes Yes Origin × NUTS1-region No Yes No No No No No Origin × NUTS2-region No No Yes No No No No Destination × Continent FE No No No Yes No No No Excluding-EU No No No No Yes No No Excluding-Madrid No No No No No Yes No Restricted instrument No No No No No No Yes

Table: Number of products and cost of import procedures

Log Products (1) (2) (3) (4) (5) (6) (7) Log Foreign Born 2011 0.041 0.047 0.035 0.020 0.078 0.059 0.017 (0.046) (0.043) (0.038) (0.061) (0.051) (0.037) (0.050) × Cost of import procedures 0.113** 0.138*** 0.129*** 0.107 0.097* 0.088* 0.125** (0.054) (0.035) (0.029) (0.065) (0.058) (0.053) (0.055) Kleibergen Wald rk statistic 12.711 14.429 10.300 9.009 24.660 15.770 8.663 Stock-Yogo 5% critical values 7.03 7.03 7.03 7.03 7.03 7.03 7.03 Stock-Yogo 10% critical values 4.58 4.58 4.58 4.58 4.58 4.58 4.58 R2 0.88 0.90 0.92 0.90 0.86 0.87 0.88 N 9,100 8,918 7,826 9,100 7,800 8,918 9,100 Destination FE Yes Yes Yes Yes Yes Yes Yes Origin FE Yes Yes Yes Yes Yes Yes Yes Origin × NUTS1-region No Yes No No No No No Origin × NUTS2-region No No Yes No No No No Destination × Continent FE No No No Yes No No No Excluding-EU No No No No Yes No No Excluding-Madrid No No No No No Yes No Restricted instrument No No No No No No Yes

Table: Number of products and time of enforcing contracts

Log Products (1) (2) (3) (4) (5) (6) (7) Log Foreign Born 2011 0.049 0.055 0.045 0.020 0.082 0.071* 0.028 (0.045) (0.043) (0.038) (0.060) (0.050) (0.038) (0.049) × Enforcement time 0.079* 0.106*** 0.089*** 0.097 0.089 0.036 0.086* (0.048) (0.037) (0.031) (0.062) (0.056) (0.040) (0.050) Kleibergen Wald rk statistic 14.302 15.298 12.745 7.099 8.872 11.188 11.175 Stock-Yogo 5% critical values 7.03 7.03 7.03 7.03 7.03 7.03 7.03 Stock-Yogo 10% critical values 4.58 4.58 4.58 4.58 4.58 4.58 4.58 R2 0.88 0.90 0.92 0.90 0.86 0.87 0.88 N 9,100 8,918 7,826 9,100 7,800 8,918 9,100 Destination FE Yes Yes Yes Yes Yes Yes Yes Origin FE Yes Yes Yes Yes Yes Yes Yes Origin × NUTS1-region No Yes No No No No No Origin × NUTS2-region No No Yes No No No No Destination × Continent FE No No No Yes No No No Excluding-EU No No No No Yes No No Excluding-Madrid No No No No No Yes No Restricted instrument No No No No No No Yes

Table: Number of products and cost of enforcing contracts

Log Products (1) (2) (3) (4) (5) (6) (7) Log Foreign Born 2011 0.046 0.061 0.049 0.007 0.086 0.060 0.021 (0.048) (0.045) (0.039) (0.060) (0.054) (0.037) (0.052) × Enforcement cost 0.075* 0.063 0.059 0.085* 0.067 0.073 0.092* (0.043) (0.049) (0.040) (0.050) (0.051) (0.046) (0.047) Kleibergen Wald rk statistic 13.668 15.034 10.636 13.345 23.396 17.019 8.471 Stock-Yogo 5% critical values 7.03 7.03 7.03 7.03 7.03 7.03 7.03 Stock-Yogo 10% critical values 4.58 4.58 4.58 4.58 4.58 4.58 4.58 R2 0.88 0.90 0.92 0.90 0.86 0.87 0.88 N 9,100 8,918 7,826 9,100 7,800 8,918 9,100 Destination FE Yes Yes Yes Yes Yes Yes Yes Origin FE Yes Yes Yes Yes Yes Yes Yes Origin × NUTS1-region No Yes No No No No No Origin × NUTS2-region No No Yes No No No No Destination × Continent FE No No No Yes No No No Excluding-EU No No No No Yes No No Excluding-Madrid No No No No No Yes No Restricted instrument No No No No No No Yes

Intro and literature Empirical approach Results Conclusion

Conclusion

We find evidence that ethnic networks cause trade through the extensive margin Ethnic networks remove trade frictions related to per shipment–per product fixed costs The pro-trade effect of ethnic networks is explained by escaping the regulatory burden that restricts exchange

Groizard & Mart´ ın-Montaner Migration and trade