Can Foreign-Born Populations Reduce Informal Trade Barriers? An Examination of US State Level Exports to Latin America

The importance of ethnic populations in reducing informal trade barriers has received increased attention in the recent literature. This analysis extends the literature by estimating the effect of Latin American ethnic populations on U.S. state-level exports to Latin America. Overall, the results document a statistically significant foreign-born effect. Thus, the results support the notion that foreign-born populations can reduce informal trade barriers and help exhaust trade potential where significant cultural or political barriers exist. Furthermore, disaggregating by country suggests that the overall effect of foreign-born populations on trade is not uniform across countries. This suggests a need for caution when using aggregate data, even among a relatively homogenous sample of countries.