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.
Reference:
Lodefalk, Magnus, Fredrik Sjöholm and Aili Tang (2020), "International Trade and Labor Market Integration of Immigrants". IFN Working Paper No. 1343. Stockholm: Research Institute of Industrial Economics (IFN).