Proximity, trade and ethnic networks of migrants: case study for France and Egypt

Purpose – The purpose of this paper is to study how proximity affects the trade-migration link. By focusing on two case studies, France and Egypt, the authors explore if migrants promote and help to deal with market heterogeneity in international markets. Using an ethnic network approach the authors also test for interactions between the characteristics of migrants and proximity issues. Design/methodology/approach – The paper builds on two case studies to illustrate the main working hypotheses. The main framework is that of ethnic networks, proximity ties, and market heterogeneity. Static and dynamic panel data methods are employed when estimating extended gravity trade equations. The authors account for country-pair fixed effects and instrument by lagged stocks of migrants, in order to deal with bilateral commonalities and endogeneity issues in the estimation procedure. Findings – The paper provides evidence on how proximity enhances trade. Additional trade effects are found for countries sharing closer ties. Networks of migrants appear to help firms to deal with fixed trade costs, also generating some market heterogeneity that at the end influences the trade-migration linkage. Characteristics of migrants also seem to matter, interacting with proximity issues, and resulting in specific trade effects. Practical implications – Proximity issues seem to matter in the trade creation effects of networks of migrants. In this way integration processes between countries would be showing some positive externalities in the side of trade flows. Characteristics of emigrants should be taken into account when defining migratory policies, mainly for the education and assimilation issues. Originality/value – The paper get deeper insights in some emerging issues in the trade-migration literature by focusing in two relevant case studies.