To Örebro University

Services play an increasingly important role in production, employment and international trade but are subject to substantially higher trade costs relative to manufactured goods. Knowledge of how these trade costs can be mitigated is important for facilitating trade of services. In this paper, we analyze the role of immigrant employees as facilitators of firm exports of services, a role that remains largely unexamined. We bridge the gap in existing research by drawing on new data for nearly 30,000 Swedish firms during the period 1998-2007 within a heterogeneous firm framework. The results have important policy implications. As the multilateral approach to facilitating trade is challenged and more countries are imposing measures to restrict the cross-country mobility of people, policymakers may need to find new ways to promote exports of services. Our results indicate that immigrant employees spur firms’ export of services activities: hiring one additional foreign-born worker can increase services exports by approximately 2.5 percent, on average, with a stronger effect found for skilled and newly arrived immigrants. Therefore, policymakers could leverage the findings of this study to implement initiatives that utilize high-skilled immigrants to promote services exports.

En kommande brexit kommer att få politiska och ekonomiska konsekvenser, inte minst genom minskad utrikeshandel och försämrat ekonomiskt samarbete i Europa. Vi diskuterar de ekonomiska konsekvenserna av en brexit, med fokus på handel och handelspolitik. Förmodligen har de negativa ekonomiska konsekvenserna underskattats eftersom den handelshämmande effekten av minskad migration inte beaktats. Vår slutsats är att brexit kommer att försämra den ekonomiska integrationen mellan EU och Storbritannien samt leda till en försvagad brittisk handelspolitik, vilket särskilt kan drabba Sverige. För att minimera kostnaderna av brexit bör Sverige eftersträva ett så ambitiöst och heltäckande ekonomiskt partnerskapsavtal mellan EU och Storbritannien som möjligt. 

Offshoring provides firms with opportunities for internationalization and growth. But, offshoring comes at a cost, especially in presence of inadequate information and trust friction. Immigrant employees could reduce such offshoring transaction costs through their knowledge of former home countries and via access to foreign networks. This is the first firm-level study on migration and offshoring. In estimating a firm-level gravity model on new employer-employee data for approximately 12,000 Swedish firms during the time period 1998-2007, we are able to show that immigrant employees have a significant and positive impact on offshoring. Hiring one additional foreign-born worker can spur offshoring with up to three percent on average, and even more to low-income countries. The findings of this study could have potentially important policy implications. In addition to showing that immigrants could provide options for countries that aim to promote offshoring, the results introduce a completely new channel through which migration may promote development, through offshoring. This could encourage governments of developed nations to enhance their emphasis on migration as a tool for supporting private sector development in emerging economies.

We examine the role of migrants in trade using a firm-level approach. We exploit a new employer–employee panel for Sweden, which encompasses close to 600,000 full-time employees, approximately 12,000 firms and data for 176 countries for the period 1998–2007. The resulting analysis provides novel firm-level evidence on the trade-migration relationship. Foreign-born workers have a positive association with firm exports. However, immigrants do not have an unconditional positive impact on firm trade. Mainly small firms gain from hiring foreign-born workers, and migrants need to be skilled and recently arrived to have a clear positive impact on firm export performance.

The UK leaving the European Union, a ‘Brexit,’ would have economic and political implications. One of the most profound economic impacts would be on trade—the EU is the UK’s most important trade partner, with approximately half of UK total trade. A Brexit would imply looser economic integration between the UK and EU. In addition to the trade barriers that would arise from leaving the single market, there would also be negative trade policy effects. Previous analyses of the cost of a Brexit to the UK economy in terms of trade have probably underestimated the impact because they overlook the trade- enhancing role of migration. A Brexit would be likely to limit migration, which, in turn, would aggravate the exit’s trade-disruptive effect. 

Migration kan främja internationalisering. De positiva sambanden härleds till att migranterna med sina språkfärdigheter samt kunskaper om och kontakter i andra länder kan bidra till att sänka kostnaderna för företagens utrikeshandel. Dessutom kan migranter öka handeln genom att efterfråga produkter från sina hemländer. Bidraget till internationaliseringsprocesserna kan därmed ge företag och konsumenter tillgång till större marknader. Det ökar konkurrensen och effektiviteten i ekonomin.

New Ways of Promoting Internationalization – What Role for Migration?

This article summarizes the large number of theoretical and empirical studies on the role of migration for internationalization and discusses relevant policy implications in a Nordic context. Migration is assumed to lower costs associated with internationalization through knowledge and contacts. We survey the evidence and conclude that migration has a real potential to contribute to countries’ and firms’ internationalization. However, there is considerable co-influence from several factors. The potential of migration to facilitate internationalization should be better utilised in trade policy-making.

This study provides novel evidence of a positive and significant influence of firm investment into foreign networks – through the hiring of foreign-born workers in the firm – on both the propensity to export services as well as the intensity in exports. Because trade barriers are higher for services than for goods, and since trade in services is more sensitive to informal trade barriers, firm investment in access to foreign networks could in particular help to increase services exports. Investment in foreign links could benefit the overall access in the same cluster of firms,which, however, lowers the incentive for the individual firm to invest in such linkages itself. This study formalizes this idea that that the world can become ‘smaller’ through firms’ strategic trade-related decisions. We investigate whether firm investment to obtain access to foreign networks impacts exports of services by estimating a fixed effects panel model on a comprehensive firm-level dataset for Sweden and looking in particular at investment in links through the hiring of immigrants. Instrumental variable estimation mitigates the endogeneity concern. In addition to the key finding, our results demonstrate that weaker export experience enhances the role of investment into foreign networks in terms of propensity to export. As an ancillary result, we find that the skill level of foreignborn workers and the time elapsed since immigration also impact the degree to which firms can utilize foreign-born personnel as an investment to gain access to networks abroad. Our results provide a new understanding of how firms can overcome trade barriers that specifically impede services by investing in foreign networks, for example, through the hiring of foreign-born personnel. In this, our study emphasizes the need for policymakers to increase labor market participation among the foreign-born population as to way to promote internationalization in terms of services exports.

This paper takes as its point of departure the unique position recently adopted by Swedish policymakers emphasizing migration as a tool to increase trade. We attempt to empirically scrutinize this position. Our results demonstrate that migrants stimulate exports, especially along the extensive product margin of trade and for differentiated products, but have no significant impact on imports. This finding suggests that for small open economies where numerous immigrants are refugees, the strategy of using migration to facilitate trade may only be effective with respect to exports. This paper also contributes to the literature on trade and migration by exploiting data on gender and age, which allow us to draw inferences on the underlying impact channels. We adopt an instrumental variable approach to address the endogeneity issue due to potential reverse causality. The pattern of results is consistent with the hypothesis that migration primarily reduces fixed trade costs resulting from information and trust friction across migrant host and source countries. Importantly, the results imply that policymakers may be able to promote trade by improving immigrants’ labor market integration instead of simply being restricted to promoting more liberal immigration policies, which is generally more controversial.

Ekonomin blir alltmer tjänsteorienterad. Sveriges BNP utgörs nu till ca 70 pro- cent av tjänster. Den andel av arbetskraften som sysselsätts inom tjänstesektorn ökar, samtidigt som industrin blir mer tjänsteintensiv. Men trots att karaktären på svensk utrikeshandel följer en liknande trend brister förståelsen av vad som driver och hämmar tjänsteutrikeshandeln. Denna kunskapslucka har fått oön- skade konsekvenser och kan förklara varför insatser för att underlätta interna- tionalisering avseende tjänster har fått en undanskymd roll i handelspolitiken. Denna artikel analyserar hur utlandsfödda inverkar på företagens utrikeshan- del med tjänster. Vi finner stöd för att svenska företag kan öka sin tjänsteutrikes- handel genom att anställa utlandsfödda med högskoleutbildning.