The Casual Impact of Immigration on Trade: US Econometric Evidence

This report delves into the casual impact of immigration on US trade, utilizing econometric evidence to analyze the relationship. The study investigates the influence of immigration on US trade levels, examining factors such as labor economics and the role of immigrants in fostering trade. The research poses questions regarding the relationship between immigration and labor economics, the role of immigration in promoting trade, and strategies for enhancing US trade with its partners. The rationale emphasizes the need for measures to boost US exports in a challenging economic climate, highlighting the significance of immigrants in trade growth. The report reviews literature on low income and immigration, family factors, and the role of immigrants. The methodology outlines the research type, philosophy, approach, design, data collection, and analysis methods. The findings and recommendations are presented to offer strategies for trade enhancement in the context of the USA.

The Casual Impact of Immigration on Trade:
Econometric Evidence from the USA

TABLE OF CONTENTS
CHAPTER 1: INTRODUCTION................................................................................................................3
Background of the study..........................................................................................................................3
Research aim and objectives....................................................................................................................4
Aim and objectives..................................................................................................................................4
Research questions..................................................................................................................................4
Rationale of the study..............................................................................................................................4
Significance of the study.........................................................................................................................5
Structure of dissertation...........................................................................................................................5
CHAPTER 2: LITERATURE REVIEW.....................................................................................................7
CHAPTER 3: RESEARCH METHODOLOGY........................................................................................10
Research type........................................................................................................................................10
Research philosophy..............................................................................................................................10
Research approach.................................................................................................................................11
Research design.....................................................................................................................................12
Data collection.......................................................................................................................................13
Data Analysis........................................................................................................................................13
Sampling................................................................................................................................................14
Ethical consideration.............................................................................................................................15
Validity and Reliability..........................................................................................................................15
Limitation of the study..........................................................................................................................16
REFERENCES..........................................................................................................................................18

CHAPTER 1: INTRODUCTION
Topic: To ascertain the casual impact of immigration on US trade level: Evident from the political
refugees.
Background of the study
US is one of the developed nation and largest economy of the world. US is one of the largest
exporter and importer in the world. There are number of factors that are playing crucial role in making US
economy as one of the largest one. One of these factors is immigration. In past couple of years, it is
observed that in the USA foreign born population is increasing at rapid pace. Due to fast increase in the
immigration trade of US with other nations also increase at rapid pace. There are number of reasons
behind this. Immigrants who migrate in the USA have deep knowledge about their country people
preferences and also have contacts in their country of origin. These immigrants assist US companies to
get more better and reliable information about foreign market. Moreover, US companies directly do not
prefer to do trade with any company (Alola, 2019). Through personal contacts or corporate contacts,
they if come near to any foreign company then in that case they trust foreign company. In other words, it
can be said that information received through personal or corporate contact is more relied by US firms
and by considering that thing only they make foreign partners. Trust is one of the main factor which US
companies give due priority before entering into trade with any foreign company. In recent yearly many
econometric research studies are carried out and in that it is commonly identified that immigrant play
crucial role in promoting trade between US and its trading partners. It is also observed in the research
studies that bilateral impact of immigration on trade slightly favour host country. Such kind of things not
only promote export and import between nations but also lead to fast growth in FDI in both host and
origin nation.
Migrants play crucial role in lowering down cost of business for the host nation, as they have
better knowledge of the domestic market, language and business practices. They also have good access in
the host country and due to this reason in better way they understand both company needs and wants and
play crucial role in cementing strong partnership between US and foreign nation firm (Peters, 2015).
Past research studies indicate that 10% increase in immigrants lead to 1.5% increase in trade between
nations. It can be said that immigrants proved asset for the USA and play important role in elevation of its
economy.

Research aim and objectives
The aim behind doing current study is to assess the extent to which US trade level affected due to
immigration.
Aim and objectives
On the basis of above aim following objectives have been drafted:
 To develop understanding about immigration and labour economics.
 To investigate the level to which immigrants foster trade within US.
 To analyse the impact of econometric methods on relationship between immigration and trade
level.
 To recommend strategies through for trade growth or enhancement in the context of USA.
Research questions
 What is the relationship between immigration and labour economics?
 What role immigration play in promoting trade between US and its trading partners?
 What strategies US can follow to increase its trade with the trading partners?
Rationale of the study
In current time period US economy is facing a lot of problems as its GDP is growing at very slow
pace. Unemployment rate is also high. However, it gets declined in past couple of years since 2008 but
still US economy is not recovering from the recession. Thus, it become very important for the USA to
take steps immediately or adopt measures that may play important role in increasing exports of USA to
other nations of the world. In past research studies it is identified that immigrants are playing vital role in
elevation of trade of USA with other nations of the world (Gutiérrez, 2016). Thus, it was inevitable to
carry out research to identify that in case of economic downturn is observed in the global economy do
immigrants play any role in US trade growth. If role is identified then in that US Government can take
actions and may use this as an instrument to elevate its export to the foreign nations. By doing so it to
some extent can improve its economic growth rate. Thus, it was necessary to carry out research so as to
identify whether approach that was effective earlier is useful today also.

Significance of the study
Current research study has great importance because it will reflect extent to which immigrants
can be utilized effectively by the US Government to improve its economic condition. Moreover, by
considering labour economics labour factors that are responsible for consistent elevation in immigrant
number in the USA will also be identified. Thus, by doing so it will be identified that whether immigrants
play any role in increasing trade between US and partner nations and reasons due to which people are
becoming immigrants in the USA. By focusing on the nations from where large number of immigrants
come like India and China (Burstein. and et.al., 2017) US can increase number of immigrants and can
promote trade with the trading partners. In this regard US can relax its Visa rules etc. Thus, it can be said
that scope of the present research study is wide and is also specific which will lead to generation of useful
results.
Structure of dissertation
Chapter 1: Introduction: It is the one of the most important section of the present research study because
in this immigration and its connection with the elevation in trade is clearly explained which is also
evidenced by the previous research studies. Apart from this, significance and rational of the research
study is also given. Thus, one just be reading introduction section will come to know about research topic
and its background and sort of results that research study may produce.
Chapter 2: Literature review: In this section of the report varied authors views and their literatures are
reviewed in detail and critical analysis is done. By doing so positive and negative views of authors are
identified and broad understanding about the research topic is developed. According to research study aim
and objectives varied themes will be prepared and on that extensive research will be carried out and by
doing so deep understanding about research topic will be developed,
Chapter 3: Research methodology: It is another important section of the report under which ways in
which research study will be carried out is determined in systematic manner. In this section of the report
research approach, design, philosophy and data analysis approaches etc are determined. Thus, it can be
said that clear outline of the research study is clearly determined in this section of the report.
Chapter 4: Data analysis & findings: It is another important section of the research study and in this
data, analysis is done by using method that was determined in the research methodology section of the
report. Data analysis approach may be thematic or quantitative data analysis approach like statistical
analysis tools can be used to analyse data. It depends on the researcher that which of the technique it finds
most appropriate. If one intends to identify relationship between variables then in that case it can use
statistical tools. There are number of statistical tools like regression and T test etc that can be used to

analyse data and to identify relationship between variables. On other hand, thematic analysis just
interprets results and it does not reflect relationship between variables.
Chapter 5: Conclusion & recommendations: In this section of the research study after doing entire data
analysis conclusions section is prepared. In this section results obtained from literature review section and
data analysis section are interlinked to each other and on that basis conclusion section is prepared. After
preparing conclusion recommendation section will be prepared in which appropriate strategy will be
recommended that can be followed by the US government to increase its trade with the foreign nations.

CHAPTER 2: LITERATURE REVIEW
Low income and immigration
As per views of Ottaviano, Peri and Wright, (2018) low income and immigration are corelated
to each other. In most of nations of the world people are migrating to other nation due to low income.
People from countries like India and China have high population in the US and play great role in the
country development. People specially in India believed that though they have higher education they are
not getting salary they deserve. Hence, they promoted to do job in foreign nations. Many people have
target that they will do job on foreign land and will go back to their country and will convert currency
which give boost to their savings. Thus, low income is considered as the one of the main factors
responsible for the immigration in other nations. In India and China people believed that even they have
higher level of degree like MBA and Engineering they get low salary initially and after that few years.
Thus, one has to wait for good salary amount for many years. With passage of times expenditures also
increased which lead to low or no saving. Ultimately, this lead to dissatisfaction among people and they
go to other nation for the job. Overall, it can be said that low income is the primary factor that motivate
people to do job in other nations of the world. Over the years Government of India and China create lot of
employment opportunities but both have large number of youngsters and due to this reason make efforts
prove ineffective. Thus, countries have to provide more earning opportunities for the individuals so that at
fast rate youngsters can observe hike in their salary. Immigration ultimately hurt origin nation because it
loses its talented human resources which adversely affect it.
Contrary to this Kuznets, (2017) state that low income can be not be considered as root cause of
immigration because there are number of people that have low income and also have opportunity to do
job in foreign nation but all of them do not do so. This is because one has low income but if it focusses on
its skill development then in that case it can observe good hike in its salary. India and China both are
developing economies and have pool of talented people. They have vast human capital that is growth
engine of their economy. Those who are educated and gain experience through certifications get job with
good salary. Important point to note is that in nation like India education is more theoretical then
practical. People are not getting practical knowledge during course up to required level and due to this
reason initially and up to few years receive less amount of salary. Youngsters also understand this thing
and due to this reason enrolled in varied certification courses and get good job. Thus, low salary can not
be solely considered main reason behind immigration.
As per views of Martin, (2017) family factor is also main reason that is promoting trade
between two nations. It can be observed that there are large number of Indian Muslims that live in Arab

nations. When they decide that they have to return back to their nation they send their children in Arab
countries. Thus, in this way family relationship also promote immigration in Arab nations. This is also
observed in the USA as due to family relationships large number of foreign people comes in the USA and
taken citizenship.
Contrary to this Jacks and Tang, (2018) state that family in foreign nation promote their
members who are living in the country of origin to come and live with them. However, this factor is not
playing any important role in increasing immigration in the USA. There are large number of people who
does not prefer culture and lifestyle of their country and promoted to reside in the foreign nation. Family
factor only assure them that it become easy for them to live in USA. It is the ones intention to do job in
the foreign nation or USA that motivate it to migrate in USA.
Political refugee and immigration
According to Marino, Penninx and Roosblad, (2015) political instability in the Arab nations
and other Muslim nations is the one of the main factor that is promoting immigration in the USA. Apart
from this, in many nations of the world bad behaviour is done with the minorities. For example, in nations
like Sri Lanka and Pakistan Buddhist and Hindu are exploited. Such kind of people flee to USA to protect
themselves and to get employment opportunity. Thus, large number of people every year comes in the US
as political refugee. This is further evident from the fact that in European nations large number of refugee
comes from the Islamic nations. Attack of ISIS in Syria and other nations lead to fast elevation in number
of immigrants to EU. Moreover, from Africa also every year large number of people comes to EU. Thus,
it can be said that political refugee is the one of the factor that promote immigration in EU and US. Thus,
it can be said that condition is very serious and, in many cases, immigration negatively affect EU and US.
In upcoming years also, large number of people will come to the US as with passage of time conditions in
the middle east may become worst which will ultimately lead to elevation in migration. US does not have
any benefit from such kind of migration because in middle east and some African nations condition is
already worst and due to this reason US can not expect any sort of elevation in trade with the relevant
nations. Thus, it can be said that these immigrants are acting as cost for the US. Many of them live in
refugee camps and Government of US have to bear cost. Thus, in the US systematic approach is followed
under which refugee are placed in the specific states and it is ensured that in these states specific ethnic
group does not get concentrated in that specific state. Many times, it happened that ethnic group
concentrated in specific area and start opposing local Government or influence its governance system. For
example, in many Mosques in EU Muslims do prayer outside sacred place. Such kind of thing is legal in
EU. This reflect that concentration of specific ethnic group affect local people to great extent.

Contrary to this Tucker, (2019) state that immigration on large scale is not caused due to
injustice or damage that caused due to terrorist attacks. In middle east nations economy is not performing
good and political instability is the one of the main reason behind it. Due to instability in Government and
activities of terrorist organizations investors are not confident about middle east countries and due to this
reason, they abstain from making investment in middle east. This lead to elevation in unemployment rate
and people are migrating to other nations of the world so that livelihood can be earned. Hence, poor
economic condition of the nation is the one of the main reason due to which large number of people are
migrating to EU and US. With passage of time if economic condition of these nations will get improved
then in that case it can be expected that immigration will reduce to US from middle east nations.
Unemployment and immigration
According to Alarcón, (2017) unemployment is the one of the main reason behind elevation in
immigration to USA. In many nations of the world unemployment was already prevailed before 2008 but
due to recession this problem further deepens to great extent. Due to lack of employment opportunity
people from many nations of the world comes in the USA and Middle east nations for employment
purpose. Thus, it can be said that poor economic conditions from the nation greatly play an important role
in increasing unemployment in the nation. Still global economy is in recession and due to this reason
economic condition of the most of nations of the world is not good. Thus, in the future time period
unemployment may further increase. US Government in order to handle such kind of situation is taking
tough steps and make Visa rules very strict. Such kind of strict rules ensure that less number of
immigrants will become able to come in the US. Although, immigrants play vital role in assisting US
Government to increase its trade ties with the trading partner. Despite of this fact considering
employment conditions in the self-land US Government is not allowing most of people to come and settle
in the US. Thus, it is clear that unemployment is increasing immigration in the US. In many nations of the
world unemployment rate is about 8% and more specially in the African nations. Condition in these
nations is very bad. Number of factors may such kind of situation like corruption across Government
departments’, terrorism, high illiteracy rate. Economic infrastructure in these nations is not good and due
to this reason people have less income and large population is working on contract basis. Such kind of
situation motivate people to come in US for job purpose so that they can earn good amount of money to
fulfil all their needs and wants.
Contrary to this Anderson, (2015) state that unemployment is not the main reason behind
immigration in to US. Lack of career development opportunity is the one of the factor that motivate
people to move to US. In many nations like India which is developing economy there are number of
highly educated people but not getting wages and salaries according to the talent they possess or work

they do in the company. Lack of career building opportunity is motivating people to go to US because
they know that there they will get compensation according to their knowledge, talent and skills. Thus,
unemployment is not main reason behind fast increase in immigration in the US market. It can also be
observed that like Middle east countries US is not facing problem where there is no availability of
workforce for doing low skilled task. If one has skills then it definitely gets job in its country of origin,
there is not doubt on this thing. This is the reason due to which just because of unemployment one does
not prefer to go to US, even such kind of people go to Middle east nations for doing a job. Thus, in no
way unemployment can be considered as one of the main reason behind people immigration to USA.
Exchange rate and immigration
According to Hainmueller, Hiscox and Margalit, (2015) exchange rate greatly affects any
economy as in balance of payment export are more then import of goods then in that case demand of local
currency become strong and its value increase relative to other currencies. It can be observed that if
currency of the nation is strong the business firms of country get more value from export. Thus, it can be
said that currency exchange rate has a very high importance in the trading market. In same way, currency
also affect labours to great extent. In many nations there is trend among people that their children’s cross
20 send to the Middle east or other foreign nation whose currency is so strong then their country of origin
currency. In such kind of nations labours from foreign nation send remittances to their country of origin
which after conversion into domestic currency become higher amount. Thus, concept is that labours
believed that they are unskilled and cannot earn much money in their nations and due to this reason must
go to foreign nation and earn money and convert it into domestic currency so that wealth can be
developed. Thus, exchange rate is also one of the main factor that is promoting people to migrate to other
nations of the world. In Middle east large number of Indians, Pakistanis, Bangladeshis and Sri Lankans
work on unskilled job and exchange rate difference between host nation and their country of origin is the
main reason behind it. This factor will prevail in future also. Thus, immigration in Middle east nations
will increase in the upcoming time period. However, in case of USA this is not a factor that play decisive
role in promoting immigration. This is because in US on unskilled jobs most of local people are employed
and foreign individuals are only doing a skilled job.
Opposite to this Jaeger, Ruistand Stuhler, (2018) state that there are large number of people
that are doing a job in USA because its currency conversion value is very high in the domestic currency.
Many people individually do job in the US and send remittances to their parents. Moreover, there are
large number of foreign individuals who are doing job and also keep parents with them but their family
partially live in country of origin. Thus, exchange rate is the one of the common factor that is greatly
promoting people to immigrate to the US. This factor will be consistently factor that will motivate people

to become immigrant in the US market. However, strict rules of HIBI Visa and others now prevent most
of foreign nationals to come and reside in the USA for employment purpose.
Trade cost and immigration
According to Alola, (2019) trade cost and immigration are closely related to each other. It is
assumed and believed by many researchers that immigration play crucial role in minimizing trade cost
between nations. As per facts international trade in the services in past 10 years increase at rapid pace.
From 1980 to 2011trading of goods at global level grew on an average 7.3%. and services grew by 8.2%.
Interesting fact is that at same time in many developed nations immigrants number increased at rapid
pace. Immigrants play a vital role in reducing trade cost between host country and country of origin by
helping firms to break cultural and institutional barriers in the foreign market. When any company enter
into the new market it has to do lot of market research and accordingly have to operate business. This lead
to increase in cost. Moreover, when any firm enter into the market it is not aware about all sort of
alternatives and due to this reason also trade cost get increased. Moreover, due to breach of domestic rules
and regulations also penalty is imposed on the business firm sometime. This also increase trade cost in the
business. In case of business firm take assistance from the immigrant then in that case it receives accurate
information about foreign market people needs and wants as well as preferences and accordingly need to
offer product to people. In case of many companies it is observed that they get huge success in their
domestic market but on foreign market completely failed. This happened due to less awareness of the
people behaviour. Due to lack of awareness firm failed to address customers in proper manner and failed
which ultimately lead to elevation in trade cost. Thus, it can be said that immigration and trade cost both
are interrelated to each other. If immigration increase trade cost decline. It is also observed that
immigrants can play pivotal role in reducing import of substitute cost. This is because immigrant now
about its country and it can assist firm to buy substitutes from any other suppliers at relatively low price
in its country of origin. This lead to decline in the trade cost. Thus, it can be said that trade cost to great
extent is affected by the immigrants.
As per views of Hanser, (2015) immigration assist company to diversify its business in multiple
nations at fast pace and in proper manner. Such kind of thing lead to elevation in overall productivity and
sales. Elevation in sales lead to enhancement in profit in the business. Apart from this, operations are
carried out in the multiple nations which lead to generation of economies of scale in the business. This
means reduction is observed in the trade cost in the business. Thus, it can be said that trade cost and
immigration are closely related to each other and with increase in immigration there is probability that
trade cost may decline for the firm.

Contrary to this Santana-Gallego, Ledesma-Rodríguez and Pérez-Rodríguez, (2016) state
that immigration can not assist firm in reducing its trade cost. This is because when any multinational
company commence its operations in the foreign nation it hires employees from that nation. Even though
that company failed in its business. There are number of US large size firms that failed in the China even
they have Chinese employees in their office. This proved that immigrants can not play any sort of
important role in assisting business firm in reducing its trade cost. Any one is immigrant or belong to
other nation that does not mean that relevant entity have deep and accurate knowledge of its domestic
market. It is the company efforts that make it established brand name in the foreign nation. Company
have to follow unique business strategy to capture share in the foreign market. By making efforts in the
right direction company establish its brand name in the foreign market and compete with the rivals.
Ease of availability of information and immigration
According to Faris and et.al., (2017) immigrants in number of ways assist firm in increasing its
business at rapid pace. Immigrants have deep knowledge of the domestic market and due to this reason,
they can easily provide varied sort of information about the market to the US companies. Information
may be related to consumer behaviour of the people, value system, cultural system and rules and
regulations etc. In past it is observed that many firms of US failed to operate their business in proper
manner in the foreign market like China. For example, in China eBay failed initially and it was no where
in competition in respect to the Chinese firm Taobao. Taobao follow different strategy and under this it
commences instant messaging system. Customers in the China are highly sensitive and they do not trust
such kind of services easily. Customers in China like to interact with the seller directly. They like to
obtain seller online status. EBAY however, had rating system where sellers were give rating on basis of
product they serve and customer satisfaction but Chinese people are highly sensitive and due to this
reason, they do not prefer to buy through mentioned company portal. Chinese people prefer to do
interaction with seller then slightly believe on rating. EBAY also face problem in the Japan as it does not
make changes in its purchasing methods and strategies by considering local preferences. In Japan in order
to make purchase from eBay people have to make use of credit card and make online payment. Cash on
delivery facility was not available in the business. On other hand, Japanese people do not believe in
online payment and prefer cash on delivery. Thus, lack of ease of availability of information greatly affect
firm business in the foreign nation.
As per views of Van den Berg, (2016) immigrants supply a lot of valuable information to the
business firm which help them to establish business in the foreign market in proper manner. In absence of
accurate information sometimes business get failed. Best example of business failure if the Mc Donald
which open its stores in the Jamaica, Barbados and Trinidad and Tobago. Mentioned restaurant chain