International trade and labour market integration of immigrants

We examine whether international trade improves labour market integration of immigrants in Sweden. Immigrants participate substantially less than natives in the labour market. However, trading with a foreign country is expected to increase the demand for immigrants from that country. By hiring immigrants, a firm may access foreign knowledge and networks needed to overcome information frictions in trade. Using granular longitudinal matched employer-employee data and an instrumental variable approach, we estimate the causal effects of a firm's bilateral trade on employment and wages of immigrants from that country. We find a positive, yet heterogeneous, effect of trade on immigrant employment but no effect on immigrant wages.

Automated summary

This study examines whether international trade improves the labor market integration of immigrants in Sweden. The findings suggest that immigrants participate less in the labor market compared to native workers. However, engaging in trade with foreign countries is expected to increase the demand for immigrants from those countries. By hiring immigrants, firms can access foreign knowledge and networks that help overcome trade-related information frictions. The research shows a positive, albeit heterogeneous, effect of trade on immigrant employment, but no effect on immigrant wages.