The Impact of Immigration on U.S. Trade Deficit and Immigrants' Home Bias Effect Público

Abstract

This paper investigates the impact of immigration on the United States trade deficit. Immigrants influence bilateral trade through two hypothesized channels - the network effect and the home bias effect. The latter only fosters imports and can potentially aggravate the U.S. trade deficit. By applying panel data for the U.S. and 20 trading partners spanning the years 1986 to 2018 to a gravity model of international trade, the paper reports a significantly positive impact of immigration on the U.S. deficit against immigrant source countries. On average, a 10% increase in the immigration stock is estimated to increase the deficit by $787 million annually. The results indicate a home bias effect operating in the U.S. international trade relations.

Table of Contents

1 Introduction......................................................................1

2 Literature Review...............................................................4

2.1 Network Effects and Home Bias Effects.............................4

2.2 Methodology...................................................................6

3 Data Description and Methodology......................................8

3.1 Gravity Model..................................................................8

3.2 Immigration Data............................................................10

3.3 Trade Data......................................................................11

3.4 Other Variables...............................................................13

3.5 Descriptive Statistics.......................................................13

4 Empirical Analysis.............................................................16

4.1 Overall Regression..........................................................16

4.2 Regression by Group........................................................19

4.3 Individual Country Regressions........................................21

4.4 Estimating Immigration Effects........................................22

5 Conclusion........................................................................24

Appendix A Data Source Listing.............................................30

About this Honors Thesis

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School	Emory College
Department	Economics
Degree	B.S.
Submission	Honors Thesis
Language	English
Research Field	Economics, General
Palavra-chave	Gravity Model Immigrants Trade Deficit
Committee Chair / Thesis Advisor	Kim, Jong H., Emory University
Committee Members	Mialon, Sue, Emory University Sibau, Maria Franca, Emory University

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