Scandinavian Working Papers in Economics

Ratio Working Papers,
The Ratio Institute

No 335: International Trade and Labor Market Integration of Immigrants

Magnus Lodefalk (), Fredrik Sjöholm () and Aili Tang ()
Additional contact information
Magnus Lodefalk: The Ratio Institute, Postal: The Ratio Institute, P.O. Box 5095, SE-102 42 Stockholm, Sweden
Fredrik Sjöholm: Lund University
Aili Tang: Örebro University

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, August 20, 2020

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