Trade, Institutions, and Religion: The Effect of the Jewish Diaspora on Israel's Foreign Trade

Judaism is the only world religion to predominate in just a single country, Israel, which also has a widely dispersed diaspora. This paper makes use of this fact to examine the effect of the diaspora on Israel's foreign trade. This paper contributes to the very limited literature which tries to distinguish between the effect of trade institutions (trade agreements, embassies, tax treaties, and the like) and the effect of religion or common values on economic activity in general and on trade in particular. The results lead to important policy implications: The existence of a national diaspora constitutes a trade multiplier, in view of the increased scope of emigration to the West, encouraging trade activity between the new minority communities and their country of origin with significant potential for growth, as well as for the immigrants' socioeconomic improvement.