Ethnic Networks and International Trade

Abstract

There is a well-established high quality literature on the role ofnetworks, particularly ethnicnetworks, in international trade. Ethnic networks are a way of overcominginformal barriers(information costs, risk and uncertainty) to trade by building trustand substituting for thedifficulty of enforcing contracts internationally. The networks weare interested in are thosethat form between migrants and natives in the host country and betweenmigrants and theirhome country. Ethnic networks exist when assimilation is not complete.We consider thestruggle of migrants to assimilate and, at the same time, the struggleof the local populationto prevent such assimilation. These activities affect trade possibilities.Moreover, we showthat it may well be in the interest of migrants who specialize intrade to, at some point in time,turn from investing in assimilation activities and instead investin anti-assimilation activities inorder to preserve immigrants� preferences for home country goods.JEL