Immigration and the Product Margins of International Trade∗

Immigration exhibits the potential to lower barriers to trade. We provide an empirical assessment of the effect of immigration on manufacturing trade at the firm level. In particular, we raise the question whether immigration changes the range and average value of traded products. Moreover, the use of a matched employer-employee panel covering the years 1995- 2005 enables us to disentangle whether the inflow of foreign labor matters for trade due to intra-firm employment of foreign expatriates or due to the presence of regional ethnic networks. We find that regional immigration increases overall imports but exhibits no effect on total exports. The local presence of immigrants fosters the exported and imported product range. However, the employment of foreign expatriates boosts total exports. Again, the most channel is an increase in the number of traded varieties. These results have important implications for both immigration policy and firm employment decisions