Cultural diversity, immigrants and international trade: Some empirical observations from nine OECD countries

Employing a variant of the standard gravity equation and data from nine OECDimmigrant host countries and 67 trading partners for the years 1996-2001, we examinethe immigrant-trade relationship. Particular emphasis is placed on the potential influencesof host country cultural diversity and host-home cultural distance. Data from the WorldValues Surveys and the European Values Surveys are used to calculate the culturaldistances between immigrants' host and home countries. Cultural distance is taken to be aproxy measure for the extent to which immigrants' host countries are culturally divergentfrom their home countries. To estimate the cultural diversity of each host country'spopulation during our reference period, we calculate Simpson Index of Diversity values.We find that greater cultural differences inhibit both host country imports and exports,with imports seemingly affected to a greater extent. We also observe that immigrantsincrease trade flows, perhaps by exploiting superior information regarding host countrymarkets (relative to their home country counterparts) and home country markets (relativeto their host country counterparts) and/or by acting as conduits that bridge culturaldifferences between their host and home countries. Greater cultural diversity within thehost country population is found to be positively correlated with the estimatedproportional influences of immigrants on trade. Our findings imply that immigrants playgreater roles in facilitating international trade than is generally discussed in the literature:fully or partially offsetting the influences of the lack of trust and commitments that maycorrespond with greater cultural differences between potential trading partners.