Does Immigration Stimulate Foreign Trade? Evidence from Sweden

Foreign born people are uniquely qualified to stimulate trade between their present country of residence and the country in which they were born. This study provides an empirical investigation of the link between migration and trade flows for Sweden. Trade and migration data for Sweden and 180 partner countries between 2002 and 2007 are used to estimate an augmented gravity model. The results show a statistically strong, positive and robust link between migration and increased trade flows. The analysis derives the effect from the ability of foreignborn people to improve the flow of information between Sweden and their former home countries. This study argues, in light of the findings, that immigration can be used as an instrument for increased foreign trade and that the issue of migration thus deserves increased focus in trade policy and economic policy.