Immigrants and exports: Firm-level evidence from Canada

Abstract

We examine how immigrant employment enhances trade at the firm level using unique administrative matched employer–employee data from Canada. We augment a standard model of firms' export market entry and sales decisions with trade costs that depend on destination-specific immigrant employment at the firm level. We estimate simple structural equations derived from the model that relate destination-specific exporting decisions to immigrant employment. We develop a method to deal with the potential endogeneity of immigrant employment that exploits the optimality conditions associated with the firm's employment decision. We find positive and statistically significant effects of firm-level immigrant employment on exporting. These effects vary with product type and immigrant employee characteristics in ways consistent with the idea that immigrant employees alleviate information barriers to trade.