The Impact of Immigration on Trade : The case of Sweden

The considerable increase in international trade and migration flows can be treated as the consequence of globalization and economic integration process during the recent years. The issue of immigration impact on trade has been studied a lot since the middle of 1990s and a significant and positive effect was found in most of the cases. This paper contributes to previous studies by investigating the impact of immigrants from 155 countries on Sweden’s exports to and imports from these countries during the period from 1980 till 2010, using an augmented gravity model. The impact of immigrants on exports and imports is studied separately by looking at the whole period results and the dynamic of changes within the period. Besides this the influence of immigrants’ home countries peculiarities (by dividing them on regions and level of development) and immigrants’ type (immigrant stock, immigrant flow and asylum seekers) is tested. To the best of my knowledge it is the first study that implements this variety of classification tests for Swedish data. The empirical results suggest that a 10 % increase in immigrant stock facilitates a 1% increase in exports to and a 0.5% increase of Sweden’s imports from the immigrants’ home countries. There is a tendency of gradual decrease of immigrants’ impact on both exports and imports within the period under consideration. According to the different classification tests the immigrants from Africa have the largest impact on Sweden’s exports, though European immigrants have the largest impact on imports; Swedish foreign born population from developed countries more facilitate trade than those who are from developing; new comers and temporary immigrants have almost the same impact on exports as the total immigrant stock, but there is even slightly negative effect on trade by asylum seekers