Scandinavian Working Papers in Economics

Working Paper Series,
Research Institute of Industrial Economics

No 1343: International Trade and Labor Market Integration of Immigrants

Magnus Lodefalk (), Fredrik Sjöholm () and Aili Tang
Additional contact information
Magnus Lodefalk: Örebro University, Postal: Global Labor Organization, and Ratio Institute
Fredrik Sjöholm: Research Institute of Industrial Economics (IFN), Postal: Box 55665, SE-102 15 Stockholm, Sweden
Aili Tang: Örebro University, Postal: and Ratio Institute

Abstract: We examine if international trade improves labor market integration of immigrants in Sweden. Immigrants participate substantially less than natives in the labor market. However, trading with a foreign country is expected to increase the demand for immigrants from that country. By hiring immigrants, a firm may access foreign knowledge and networks needed to overcome information frictions in trade. Using granular longitudinal matched employer-employee data and an instrumental variable approach, we estimate the causal effects of a firm’s bilateral trade on employment and wages of immigrants from that country. We find a positive, yet heterogeneous, effect of trade on immigrant employment but no effect on immigrant wages.

Keywords: Export; Import; Immigrants; Employment; Wages

JEL-codes: F16; F22; J21; J31; J61

45 pages, June 17, 2020

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