Working Paper: NBER ID: w31157
Authors: Jaerim Choi; Jay Hyun; Ziho Park
Abstract: This paper shows that the ancestry composition shaped by century-long immigration to the US can explain the current structure of global supply chain networks. Using an instrumental variable strategy, combined with a novel dataset that links firm-to-firm global supply chain information with a US establishment database and historical migration data, we find that the co-ethnic networks formed by immigration have a positive causal impact on global supply chain relationships between foreign countries and US counties. Such a positive impact not only exists in conventional supplier-customer relationships but also extends to strategic partnerships and trade in services. Examining the causal mechanisms, we find that the positive impact is stronger for counties in which more credit-constrained firms are located and that such a stronger effect becomes even more pronounced for foreign firms located in countries with weak contract enforcement. Collectively, the results suggest that co-ethnic networks serve as social collateral to overcome credit constraints and facilitate global supply chain formation.
Keywords: immigration; global supply chains; credit constraints; coethnic networks
JEL Codes: F14; F22; F36; F60; G30; J61; L14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| immigration (F22) | global supply chain relationships (L14) |
| coethnic networks (Z13) | global supply chain relationships (L14) |
| immigration (F22) | coethnic networks (Z13) |
| coethnic networks (Z13) | firm-to-firm global supply chain relationships (L14) |
| immigration (F22) | firm-to-firm global supply chain relationships (L14) |
| credit constraints (E51) | impact of immigration on global supply chain relationships (F69) |
| contract enforcement (K12) | impact of immigration on global supply chain relationships (F69) |