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The Impact of Immigration on American Import Trade in the Late Nineteenth and Early Twentieth Centuries Author(s): James A. Dunlevy and William K. Hutchinson Source: The Journal of Economic History, Vol. 59, No. 4 (Dec., 1999), pp. 1043-1062 Published by: Cambridge University Press on behalf of the Economic History Association Stable URL: http://www.jstor.org/stable/2566687 Accessed: 06/04/2010 14:06 Your use of the JSTOR archive indicates your acceptance of JSTOR's Terms and Conditions of Use, available at http://www.jstor.org/page/info/about/policies/terms.jsp. JSTOR's Terms and Conditions of Use provides, in part, that unless you have obtained prior permission, you may not download an entire issue of a journal or multiple copies of articles, and you may use content in the JSTOR archive only for your personal, non-commercial use. Please contact the publisher regarding any further use of this work. Publisher contact information may be obtained at http://www.jstor.org/action/showPublisher?publisherCode=cup. Each copy of any part of a JSTOR transmission must contain the same copyright notice that appears on the screen or printed page of such transmission. JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact [email protected].

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The Impact of Immigration on American Import Trade in the Late Nineteenth and Early TwentiethCenturies JAMESA. DUNLEVYAND WILLiAMK. HUTCHINSON Studies of the contemporary period for the United States and for Canada have established that the presence of an immigrant population is associated with an increase in trade between the immigrants' host and origin countries. We wish to discover if such a protrade phenomenon was systematically associated with the massive inflow of immigrants to the United States during the 40 years preceding World War I. Applying a gravity model to U.S. imports of 78 commodities from 17 countries at five-year intervals, we find support for a broad pro-import immigrant effect, especially for more fmished and more differentiated goods. The late nineteenth century was not just a period of substantial international trade but of internationalfactor mobility as well. Douglas Irwin 1

etween 1870 andthe onsetof the GreatWar,UnitedStatesinternational trade(importsplus exports)expandedfrom$835.8 millionto $3,614.0 millionannuallyin 1913dollars.Theprincipaltradingpartnersofthe United Statesbroadenedbeyond Canadaand northernand westernEurope("Old Europe")to include countries from southernand easternEurope ("New

1

Europe"), Central and South America, and Asia. This rapid growth of the United States was accompanied by massive inflows of both capital and labor. Immigration to the United States grew from some 2.8 million in the 1870s to almost 8.9 million persons in the first The Journal of Economic History, Vol. 59, No. 4 (Dec. 1999). c The Economic History Association. All rights reserved. ISSN 0022-0507. James A. Dunlevy is Professor, Department of Economics, and Affiliate, Program in International Studies, MiamiUniversity, Oxford, OH 45056. E-mail: dunlevjaomuohio.edu. William K. Hutchinson is Professor, Department of Economics, Miami University, Oxford, OH 45056. E-mail: hutchiwk@ muohio.edu. Earlier versions of this article were presented at the Economic History Association meetings in Berkeley, September, 1996, at the Conference on Empirical Investigations in International Trade at Purdue University, November, 1996, at the Integration of Commodity Markets in History Conference, at Snoglehom, Sweden, March, 1997, at the Triangle Economic History Workshop, and at the Seminar fuer Wirtschaftsgeschichte at the Universitaet Muenchen. The authors are grateful to the participants of those sessions, especially to Jeff Bergstrand, Pat Conway, Simon Evenett, James Harrigan, Jon Haveman, Wolfgang Keller, Jan Tore Klovland, John Komlos, Douglas Puffert, and Jeff Williamson, for their suggestions and encouragement. Dlynn Armstrong and Jennifer Furman ably assisted with the collection of the data. The authors, of course, bear full responsibility for failing to heed the good advice of others. This article was completed during Dunlevy's term as a Senior Fulbright Scholar at the Seminar fuer Wirtschaftsgeschichte, Universitaet Muenchen. 1Irwin, "United States," p. 44.

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Dunlevy and Hutchinson

decadeofthis centuryandtotaledover20.5 millionpersonsbetween1870and 1910.2Again,the sourceforthemajorityof immigrantsshiftedfromthecountries of Old Europeto those of New Europe.Capitalinflows supplemented UnitedStatesdomesticsaving,withover800 millionpoundssterlingarriving fromBritainalonebetween1865 andthe outbreakof warin Europe.3 Theconcurrentexpansionof international tradeandfactorflows is consistentwith moderntheorythatimpliesthattradeandfactorflows canbe complementsas well as substitutes.4 Recently,WilliamCollins,KevinO'Rourke, andJeffreyWilliamsonfindthatfor aggregatetradeflows duringthe period from 1870to 1940,"tradeandcapitalflows wererarelysubstitutesandoften complements,"while "tradeand immigrationwere never substitutes."5 Muchof thediscussionin the studyby Collinset al. is basedon the specific factorsmodel of tradethatrecognizesroles for capital,labor,and land.Regardlessof the modelused,however,Collins,et al. notethattheoryis strictly versussubstitutability of ambiguouson the questionof the complementarity tradeandfactorflows andthathistoryoffersan opportunityto detenninethe underwhichtradeandimmigration flowsmaybe complements. circumstances We provide empiricalevidence, independentof the factor-proportions framework,regardingthe relationshipbetweenimportsand immigrationby buildingon a recentliteraturethatarguesthatthe presenceof an immigrant stockin a hostcountryis tradecreatingbetweenthehostandorigincountries. The empiricalevidencefromtheperiod1870to 1910substantiates anecdotal evidence for that period regardingimmigranteffects on tradeand capital flows. For instance,John Brown states that nineteenth-century European "colonistsformingethnicenclavesin countriessuch as Brazilwere a ready sourceof demand[forimportedprintedcottoncloth]sincetheyidentifiedwith P. L. Cottrell the fashionin the home countryandhada similarlanguage."6 in the estabobservesthatsouthernEuropeanimmigrantswere instrumental lishmentafter1890 of local consumer-goodsindustriesin LatinAmerica;he also notesthe linksbetweenScottishmigrantsto Australiaandthe banksand tradinghousesin Scotland.7CarlosDiaz-Alejandrosimilarlywritesfor Argentina in the pre-1914 period, "Thereare many examples of immigrantmerchants, especially in the import business, graduallybecoming manufacturing entrepreneursusing their commercial profits."8Migrants have thus been portrayed as providing commercial links, as being involved in trade, and eventually, perhaps, as being involved in import-substitutingactivities. 2 See, for example, U.S. Immigration and Naturalization Service, Statistical Yearbook, table 1.

See Cottrell, British Overseas Investment, p. 43. "Factor Movements"; and Wong, "Are International Trade." 'Collins, O'Rourke, and Williamson, "Were Trade," p. 25. 6 Brown, "Imperfect Competition," p. 511. 7 Cottrell, British Overseas Investment, p. 42. 8 Diaz-Alejandro, Essays, p. 216. 3

4Markusen,

Immigrationand AmericanImportTrade

1045

Immigrantsmay serve to link the tradeof theirhome andhost countries in at least threeways. First,immigrantsmay have a taste for the goods of theirhomeland,andthepresenceof an immigrantcommunitybeyondsome minimumcriticalmass can createa marketfor importsof these goods. Presumably,this taste effect would apply especiallyto finishedmanufactures andfoodstuffs.A secondlinkcandevelopas immigrantsrecognizeopportunitiesfor tradebetweentheirhomecountryandthe host country.Awareness of cost differentials,of productdifferentiation,or of the immigrant-taste factorcouldpromotetradelinksbetweenthe two countries.This link is that of an "informationbridge."Third,relatedto this informationbridgeis the protradeeffect of ethnicnetworks.Immigrantsmaywell haveanadvantage, dueto issues of mutuallyunderstoodcultureor of trust,in dealingwiththeir countrymenwho remainat home. This is a directapplicationof ethnicnetworktheoryto internationaltradein goods.9 Theselinks,basedontastes,information,andtransactioncostsparallelthe linksbetweenearliermigrationandlatermigrationthatgoes undertheterms Thereis reasonto antici"chainmigration"or"familyandfriendseffects."10 pate, therefore,that earliersettled immigrantssimultaneouslypromote a greaterflow of tradedgoods anda greaterflow of new immigrants. As a fourth,tradediverting,effect,immigrantsmightcauseproductionin the host countryto be substitutedfor goods thatpreviouslyhad been imported.This coulddevelopto the extentthatimmigrantspossess specialized knowledgerelatingto technologyorproductionmethodsorto theextentthat domesticproducersaccommodateimmigranttastesby homeproduction.To the extentthatforeigncapitalflows withtheimmigrants,thisentrepreneurial effect, in a sense, is the process could be enhanced.This trade-substitution applicationof the taste,information,andethnicnetworksto tradesubstitution ratherthantradecreation.In principal,therefore,the posited effect of immigrantson tradeis ambiguous. David Gould and Keith Head and John Ries fmd a protradeeffect of immigrantsfor the UnitedStatesandfor Canada,respectively,in the 1970s and 1980s.11Wewonderif thatwas also the case in the classic, liberalinternationaleconomypriorto theFirstWorldWar.The 1870to 1910 periodwas one of liberaltrade,relativelyfreeandmassivemigration,the gold standard, and expansionof the Amerlargecapitalflows, andrapidindustrialization ican economy.It was also a periodduringwhich both intercontinentaland transportcosts continuedto fall as steampowerbecamethe intracontinental normfor oceantransportandas railroadexpansionprogressedin the United 9 See, for example, Fawcett, "Networks"; Landa, Trust; and Rauch, "Trade." 10See, for example, Nelson, "Migration"; Massey, "Theories"; and Greenwood, "Analysis." Dunlevy and Gemery, ("Role") address this phenomenon in the nineteenth-century American context. 11Gould, "Immigrant Links"; and Head and Ries, "Immigration."

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States, Europe,and elsewhere. This period, then, would seem especially tradeeffectsthatwe hope propitiousforthepresenceofthe immigrant-based to uncover. This article establishesan empiricallinkage between immigrationand importsby extendingthe recentworkof Gouldandof HeadandRies to the earlierperiod of mass migration.In the empiricalsections that follow we considerimportsintothe UnitedStatesof 78 differentcommoditiesfrom 17 countries,observedat five-yearintervalsoverthe 1870 to 1910period,and establishthatthe presenceof a stockof immigrantsincreasedimportsfrom the home country.12 MODELAND DATA

Explainingthe relationshipbetweenimmigrationandimportsrequiresa model thatcontrolsfor factorsthatare generallyconsideredto explainimports.FollowingGouldandHeadandRies, andothersworkingin the empirical sphereof internationaleconomics,we employa variationof the gravity model in the empiricalworkthatfollows.13 The basic gravity model relates the volume of trade, imports or exports, between two countries as a function of the size of the two countries and the distance between them. Size is measured variously in different studies as some combination of population and gross domestic product; we use per capita income and population. Control variables are then generally added, in a somewhat ad hoc fashion, to reflect factors specific to the case under investigation; this is a practice we also employ.14 The representation of the model is Importsijt= f(Per Capita Incomej, Population,, U.S. Per Capita Income, US. Population, Distance., English Languagej, Relative Income,, Relative Pricejt,Migrant Stockj, Year)

(1)

The motivation for these variables is as follows: Per Capita Income and Population of thejth tradingpartnerof the United States and US. Per Capita Income and US. Population are standardgravityvariablesintendedto measure

12 The effectof immigrants on Americanexportsduringthisperiodwill be developedin a laterpaper. 13 See, also, HummelsandLevinsohn,"MonopolisticCompetition."

14See Frankel,RegionalTradingBlocks,especiallychapter4, for a discussionof these issues. The theoreticalfoundationsof the gravityapproachhavebeendevelopedby Anderson,"TheoreticalFoundation";by Bergstrand,"GravityEquation,""GeneralizedGravityEquation,"and"Heckscher-OhlinSee also HavemanandHummels,"WhatCan SamuelsonModel";andby Deardorff,"Determinants." We Learn."


1047

the size of the tradingpartners."5 Distancebetweenthe tradingpartners,likewise, is a standardelementof thegravitymodel.TheEnglish-Language vaiable is a zero-one dummy designed to capture the transactionsand information-costadvantagesthatmightexist betweenAmericansand other Itmayalsocapturetheprotradeeffectsofthe English-speaking entrepreneurs. sharedcultureand legal system among Britain,Canada,and the United States,

as well as correctfor otherunobservedfactorsthataffecttradeamongthese countries.RelativeIncomeis designedto captureLindertasteeffects.Staffan Linderarguesthatcountrieswith similarpercapitaincomesproducesimilar, trade but differentiated,productsthat constitutethe basis of intra-industry amongstthemselves.16TheRelativePrice variableis the ratioof the U.S. unit valueof aggregateimportsrelativeto theU.S. consumerpriceindex,adjusted for tariffandtransportcosts.Unlikeothergravitymodel studiesof trade,we areworkingat the level of the individualcommodity;the idealrelativeprice measuresare unobtainableand we are forcedto use this highly aggregated rough measure as a proxy. Migrant Stock is the key variable in this study; it

denotesthe numberof immigrantsfrom the countryj living in the United Statesin yeart. 17 Finally,the Yearvariableservesas a catch-alltrendvariable andis intendedto controlfor unobservedeffects. The datacover importsof 78 commoditiesfroma maximumof 17 countries.18The set of commoditieswas selectedso as to includeboththe major importitems of the United Statesduringthe periodstudiedandto include manyof those itemsthatwerejudgeda priori likely to be relatedto specific informationor tastesheld by immigrants.Note thatwe do not hypothesize thatall importsare subjectto an "immigrantpull"effect. Ourpurposehere is to detect such a pull if it existed,not to generalizeit to all commodities. Nevertheless, it should be noted that the 17 countries in our sample accountedfor an averageof 73.6 percentof totalUnitedStatesimportsduring the 1870 to 1910 period.More importantly,the sampleof 78 commodities accountedfor an averageof 67.6 percentof total importsfromthese countries duringthis period.19 15 The defimitions of these variablesand the sourcesof the data are more fully explained in the Appendix. 16Linder, Essays;andFrankel,RegionalTradingBlocks,p. 60. 17Alternative measuresof immigrationwere considered,includingthe five-year change in the measuredmigrantstockandthe five-yearflow of nationality-speciflc immigrantsoverthe t - 5 to t - 1 interval,bothindependentlyandin conjunctionwith migrantstock.These measureswere an attempt to capturecohorteffectsthatwouldexist if newerimmigrantshaddifferenteffectson tradevolumethan did longer-settledimmigrants.In general,these measureswere inferiorto MigrantStock in their performance,and,hence,were droppedfromfurtherconsideration. " The commoditiesare listed in the notes to Table3, and the countriesare listed in the notes to Table 1. Due to limitationson incomedata,some countriesareomittedin some years. 19 In 1870 morethan20 othercountriesexportedto the UnitedStates;in 1910 the numberof other countriesexportingto the UnitedStateshadrisento over 60.

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Dunlevy and Hutchinson ESTIMATIONAND FINDINGS

The gravitymodel developedby Berstrandandothersis explicitlymultiplicativein form.Therefore,we estimatethe model describedin equation1 in doublelogarithmicformwith all variablesexceptthe EnglishLanguage The results dummyandtrendvariablestransformedinto theirlogarithms.20 of estimatingthe model across all countries,commodities,and years are reportedin Table 1, column 1. MigrantStock,the variableof primaryinterest,obtainsa statisticallysignificant coefficient of 0.29, which indicatesfor the 78 commoditiesa 10 percentincreasein a given immigrantstockresultsin a 2.9 percentincrease in the realvalue of the commoditiesimportedfromthatnationality'shomeland. We take the magnitudeof this effect to be nontrivial.This regression also indicates,consistentwiththe expectationsnotedabove,thatimportsare greater,ceterisparibus,if Englishis the languageof the exportingcountry. The estimatedcoefficienton the languagevariable,1.49, indicatesa powerful protradelink between the United States and Canadaand between the United Statesand Britain-Ireland: these bilateralflows are indicatedto be over three and one-half times the amounts otherwise predicted by our model.21Again, we take this as evidence of a powerfulprotradeeffect regardless of whether it is due to language similarity, per se, or to the common cultures of Britain, Canada, and the United States.22 Imports were greaterfrom countries that had per capita incomes similar to that of the United States, according to the negative coefficient on the Relative Income variable. Here a 10 percentreduction in the relative per capita income difference between the United Statesand a tradingpartneris estimatedto have increased the volume of real imports from that partnerby 4.5 percent. This result supportsthe LinderHypothesis, which arguesthata countrytradesmore with countries that have similar per capita income levels. Relative Price, the measure ofthe relative real, delivered price of aggregate imports, has a coefficient of -0.58 that is significant at the 10 percent level. This indicates that if transportcosts fell, if aggregate tariffs were lowered, or if domestic aggregate prices rose, then the United States imported on average more of each of the commodities in our sample. The coefficient on the Distance variableis negative andhighly statisticallysignificant;this indicatesthat, 20Approximatelyone-thirdof ourobservationson the dependentvariable,the realvalue of imports of commodityi fromcountryjin yeart arezero in value,thatis the United Statesdid not importany of the good from a given countryin a given year.FollowingEichengreenandIrwin(1995, p. 9), we transformthe dependentvariable from Mij,to (1 + Mij,)priorto the logarithmictransformation. EichengreenandIrwinnotethatwhenM is largeln(1+ MKj)approximatesln(M),andwhenM is close to zero ln(1 + Mij) approximatesM, andthereforeapproximatesthe semi-log Tobitrelationship. 21 The formulafor this is [exp(c) - 1], where c is the estimatedcoefficienton the dummyvariable. See, for example,Kennedy,Guide,p. 223. 22 "Britain"in this articlerefersto BritainandIreland.


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TABLE 1

ESTIMATION RESULTS: OVERALL AND BY GEOGRAPHIC REGION Variable Intercept ,B: absolute t-value Migrant Stock

EnglishLanguage Distance Relative Income Per Capita Income, Populationj U.S. Per Capita Income U.S. Population Relative Price Year d.f.

R2

All Regions

Old Europe

-32.67 (1.45) 0.29*** (8.70) 1.49*** (7.15) -0.79*** (11.60) -0.45*** (4.40) 1.95*** (7.08) 1.48*** (25.32) 2.14 (1.34) 0.93 (0.20) -0.58* (1.70) -0.36 (0.71) 9,266 0.21

407.02** (7.73) 0.66*** (4.99) -2.73*** (3.84) -51.71*** (10.36) -0.34** (2.17) -2.67*** (2.86) 1.35*** (10.32) 3.34* (1.62) 1.37 (0.20) -0.38 (0.76) -0.21 (0.27) 4,301 0.32

New Europe

Non Europe

-270.11*** (5.29) -0.33* (1.80)

54.38 (0.85) 0.29** (2.50) 1.43 (1.42) -0.45*** (3.01) 0.86 (0.56) 2.73 (1.16) 0.52*** (3.08) -2.70 (0.46) -13.89 (1.36) -0.29 (0.42) 1.44 (1.09) 2,244 0.16

26.68*** (6.35) -9.82*** (5.14) -15.50*** (5.05) - 1.48*** (5.45) 17.83*** (4.56) 7.54 (0.93) -0.59 (1.00) -0.44 (0.48) 2,700 0.08

* = statistically significant at the 10 percent level. ** = statistically significant at the 5 percent level.

= statistically significant at the 1 percent level. Notes: All variables except the English Language dummy and Year are in logarithms. The dependent variable is the logarithm of (1 + the real value of imports of a given commodity). Income data are available for all years for the following countries: Austria, Belgium, Canada, Denmark, France, Germany, Italy, Spain, Sweden, and the United Kingdom. Income data are available for some years for the following countries: Brazil 1870, 1890, 1895, 1900, 1905, and 1910; Chinal870, 1890, 1900, 1905, and 1910; Japan 1870, 1885, 1890, 1900, 1905, and 1910; Mexico 1870, 1885, 1900, 1905, and 1910; The Netherlands 1870, 1880, 1890, 1900, and 1910; Portugal 1870, 1890, 1895, 1900, 1905, and 1910; and Russia 1870, 1890, 1895, 1900, 1905, and 1910. Population data are available for the following countries, and geographic groups are defmed as indicated: Old Europe, all years, Belgium, Denmark, France, Germany, Netherlands, Sweden, and the United Kingdom; New Europe, all years, Austria, Italy, Portugal, Spain, and Russia; Non Europe, all years: Brazil, Canada, Japan, Mexico, and China.

ceterisparibus, importsdroppedby almost 8 percentfor each 10 percent Thetrendvariable,Year,is also included.It is seen to increasein distance.23 indicatethatoncetheothervariables areaccountedfor,therewas no additional trendin U.S. importvolumeof the commoditiesin oursample. 23For purposes of comparison, our "Old Europe" group of countries has an average distance from the U.S. of 3668 miles, "New Europe" 3959 miles, "Non Europe" 1289 miles from the U.S. On average, therefore, New Europe is 7.93 percent fartherfrom the United States than Old Europe. As a result, we would expect imports from New Europe to be (-0.79) . (7.93) = 6.26 percent less, ceterisparibus, than imnorts from Old Eurone.

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The core gravity variables,the per capita income and the population terms, have mixed results.The coefficienton the per capitaincome of the UnitedStates'tradingpartnersis close to 2.0 in valueandhighly statistically significant,indicatingthatthe United Statestendedto importmuch more fromhigherincomecountries,suchas Canadaandthoseof OldEuropethan from its other tradingpartners.The coefficient on foreign populationis almost 1.5 andhighly statisticallysignificant,which suggeststhat,controlling for per capitaincome, largercountriesmorethanproportionatelyprovided importsto the U.S. Neitherthe coefficienton U.S.Per CapitaIncome nor that on U.S. Population is statisticallysignificant,althoughboth are positive and of reasonablemagnitude.The lack of statisticalsignificance would seem to suggestthatonce otherfactorsarecontrolledfor,the growth of the U.S. economy,whethermeasuredin termsof per capitaincome or in termsof population,didnot increasethevolumeof importsofthe commodities in our samplefromour sampleof countries.24 At this point it may be worthwhileto digress from the main argument in order to addressa potentialconcern. It might be arguedthat countryspecific trade and migrationare correlatedby an unobserved,historical affinity that links some pairs of countriesespecially closely. For several reasonswe believe thatis not the case here.First,the countrieswith whom the United States had such a relationshipare Canadaand Britain. The EnglishLanguagedummyvariableis usedto capture"commonlanguage" effects, but since Canadaand Britainare the only countriesfor which the dummytakes the value of unity, it serves a quasi-fixedeffects purposeas well. Empirically,the "historicalaffinity"problemshould be isolated in the estimatedcoefficient on this dummyvariable.Second,the composition of both trade and migrationshifted during our observationperiod; this should weaken, if not eliminate,historicalfactors.Third,and we believe hypothesishasclearimplicationsfor mostcompelling,the immigrant-trade the sorts of commoditiesthatwill be most stronglyaffected by the pull of immigrants.Thesepredictionsareconfirmedin estimationsby commodity group reportedlater. We know of no other hypothesisthat implies these results;furthermore,these resultsby commoditygrouparenot impliedby a reverse causationmodel of tradepulling immigrants.At a more formal level, we re-estimatedthe specification of column 1 of Table 1 with the variables expressed as first differences of their logarithms.The data set comprises only nine observationsover time, and one of these is lost by first-differencing.Nevertheless,the estimatedregression (where "d"de24Thisdoes not precludea growthof U.S. importsof other commodities or from other source countries.It shouldalso be recalledthatimportsarerelatedto thedifferencebetweendomesticproductionanddomesticabsorption.Totheextentthatdomesticproductiongrewmorethanabsorptionduring our sampleperiodimportscouldhave remainedinsensitiveto growth.


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notes first differenceof the variablein question)with t-statisticsin parentheses is dImports = 0.38 dMigrant Stock - 0.05 dRelative Income -

(2.85)

(0.54)

0.38 dPer CapitaIncomej+ 0.97 dPopulationj+ (0.90) (1.09) 1.21 dU.S.Per CapitaIncome+8.59 dUS. Population(1.53) (2.06) 0.40 d Relative Price - 0.89

(3.32) R2 =

(1.92)

0.005, degreesof freedom= 7484

Although the R2on this regression is very low, the F-statistic is statistically significant at the 1 percent level. Note that the coefficient on (the first difference of) MigrantStockretainsits magnitudeand its statistical significance. ESTIMATIONBY REGIONALGROUPINGOF TRADINGPARTNER

As notedpreviously,the geographicsourceof migrationshifteddramatically over the 1870 to 1910 period.The immigration-trade hypothesissuggests thatthe patternof tradeshould have followed the shiftingpatternof link differed immigration.It may also be the case thatthe immigrant-trade acrossthe variousculturaland geographicnationalgroups.25We consider tradefromthreeregions,"OldEurope,""NewEurope,"and"NonEurope," across all commoditiesand all years. The country-compositionof these regions is given in the notes to Table 1. The regressionresultsfor each of these regionsis reportedin Table1. Comparingcoefficientsacrossthe regionalgroupsandfocusing only on the moreinterestingresults,we fmdthatfor OldEuropeandNon Europethe key migrantstock variableis indicatedto have had a strong, statistically significant effect on imports. For New Europe, on the other hand, a strong, negative effect is estimated. We will return to this later. The English lan25 Some commentators attheturnof the centuryarguedthatimmigrantsfromNew Europewere less skilled, less ambitious,and less purposefulthanwere membersof the Old Europeannationalities. andHourwich, Otherschallengedthis belief. See, for example,Douglas,"Isthe New Immigration"; Immigration.Formodemempiricalworksee, forexample,DunlevyandGemery,"EconomicOpportunity,"in which the authorsrefutethe ihferencethatNew Europeanimmigrantswere less rationalor purposeful;butthey do supportthe beliefthatthe OldandNew Europeanimmigrantsdidreactdifferof the late-nineteenth-century UnitedStates. ently to variouscharacteristics

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guagedummyvariableobtainsa strongandstatisticallysignificantnegative coefficient,contraryto expectations,forthe OldEuropegroup.Thisdummy variablehas a positive, but not statisticallysignificant,coefficientfor Non Europe.It shouldbe recalledthatfor OldEuropeBritainis the only EnglishspeakingcountryandforNon Europeonly Canadais Englishspeaking.The Englishlanguagedummy,therefore,is equivalentto a Britishor to a Canadiandummyvariable.No New Europecountrywas English-speaking,and, hence, the dummyvariabledoes not appearin the New Europeregression. TheDistance variablecoefficients for Old Europeandfor New Europe, respectively, are negative and positive, and in both cases effectively infinitely elastic. We suspectthis is an artifactof the data since the variance of distance within each of these groups is small and that nonobserved, country-specific factors may account for the differences in import volume.26For Non Europe a reasonabledistance elasticity of -0.45 is found. The effect of the Relative Income variable is consistent with the Linderhypothesis both for Old and for New Europe.The Relative Price variablehas the anticipatednegative sign for every region, but in no case is it statisticallysignificant. Withineach of Old andNew Europethe coefficienton foreignper capita incomeis negative,contrarybothto expectationsandto the resultsobtained for all regions together.It appearsthatthe positive coefficient for the allregionsregression(column 1) capturesthe sharpdifferencein the standard of living across the Old and New Europesof the turnof the century.The negative signs obtainedwithin-groupthen indicatethat for the relatively narrowvariationof source-countryincomes, the United Statestended to importmore fromthe lower-incomecountries. The absenceof a protradeeffect of immigrantsfromthe New European countriesis surprisingsince these "New"immigrantnationalitieshadtastes thatwould be expectedto have differedmore sharplyfrom those of native Americanswho themselveswere largelyof Old Europeanstock. The New immigrantscamelargelyafter1890,andthey dominatedimmigrationto the United Statesafter 1895. Severalexplanationsmay accountfor this result. New immigrantsdisproportionately comprisedshort-termimmigrationas opposedto settlerimmigration.It is possible thatthis shorterhorizonprecluded some New immigrantsfrom investingthe energynecessaryto develop the ties thatwe hypothesizeas promotingimports.It is also possible thatthe New immigrantswere less ableto raisethe minimumcapitalnecesAnotherpossible saryto developbusinesslinkswiththeirhomecountries.27 26 Imports from the more distant Austria and Russia, for instance, dominated imports from Italy, Portugal, and Spain in our sample. 27Dunlevy and Saba, ("Role," p. 230), using Immigration Commission data, report that for immigrants landed in the United States between 1899 and 1910 the rate of illiteracy ranged from 1 percent for the English to 68 percent for the Portuguese. The percentage of the immigrants who were male-an

ImmigrationandAmericanImportTrade

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explanationhasto do withthe narrowgeographicregionsfromwhichmany of the immigrantscame.ImmigrantsfromPortugalduringthis periodwere heavilyfromtheAzores;ItalianimmigrantswereoverwhelminglySouthern Italians.28 Tothe extentthatthese areasproducedfewerexportablesthanthe restof Portugalor Italyor to the extentthatthese immigrantshadlittle contactwith people in otherpartsof theirhome countries,the role of information would have been seriouslyweakened. ESTIMATIONBY YEAR

Table2 presentsthe resultsof estimatingthe model across all countries and commoditieson a year-by-yearbasis. This is done in an attemptto observe changes in the immigrant-import linkages over time. Note that the variablesrepresentingU.S.Population-and US. Per CapitaIncomeas well as the trend variable, which are constants for any given year, drop out of these regressions.

The estimated effect of Migrant Stock on imports rises from 0.42 to 0.70 from 1870 to 1880; it then smoothly declines to zero in 1905 and 1910. The estimates are highly statistically significant from 1870 through 1895. Clearly, there is evidence that the protrade migrant stock effect was strong for most of the period, but that it had died out by the end of our period.29 This decline in the effect of immigrant stock on imports may be related to the earlier noted lack of a protrade effect of New immigrants. It is consistent with the conjectures that by the turn of the century, earlierarrived immigrants from Old Europe had been Americanized in their tastes or that import substitute industries had developed to satisfy these tastes and to displace imports, coupled with the failure of New European immigrants to develop the needed contacts with the home countries. Evidence from Table 2 for the Relative Income variable indicates a pattern similar to that of migrant stock. Between 1880 and 1900 the Linder hypothesis receives strong support. Thereafter, the estimated coefficients remain negative, as hypothesized, but statistical significance is lost. It would appear that similarity of per capita income was not a key element in the importation of the goods in our study after 1900. We can index inversely related to the intention to permanently settle in the United States-ranged from a low of 48 percent for the Irish to approximately 80 percent for Italian and Spanish immigrants. It is also accepted that New immigrants were poorer than contemporaneous Old immigrants; whether they were poorer than Old immigrants when they entered the United States in the 1870s and 1880s is unknown. 28 A good discussion of these issues is found in J. Gould, "European Inter-Continental Emigration." 29The studies by Gould ("Immigrant Links") and by Head and Ries ("Immigration") do not span as broad a period as ours, and the dynamics of the modem immigration in terms of source countries may not be as dramatic as was the case during the earlier period. This may account for their failure to uncover such a dynamic in the modem period.


1054 * =

= Notes: All

*

d.f

R 2

Per

=

English Relative absolute Migrant Distance Interceptf3 Capita Population, Stock statistically t-value Variable Income statistically statistically Language Income, variables

significant exceptsignificant at significant at at the thethe English (7.05)(3.71)(2.29) (4.33)(2.47)(5.23)(3.46) 1870 1 5 10 8260.27 1.15**-0.84*** 1.75**0.42*** -28.78*** 4.48*** 1.17***

percent percent percent Language are level . level. 5980.38 0.19 (4.44)(0.48) (2.04)(4.47)(4.84)(4.87) 1875 (10.08) in level. 0.63*** -44.26*** 5.43*** -0.59** 2.19*** 3.75*** ESTIMATION natural logs; 0.53 1880 1.25 6200.37 (5.12) (6.78)(2.73)(5.35)(0.07) (1.34) (11.67) RESULTS, the -2.72*** 0.70*** -2.62*** 2.66*** 1.53*** ALL dependent -1.37 8690.24 (5.33) (5.67)(2.80)(5.78)(2.33) 1885 (10.75) (1.45) 18.48** 2.00**-2.41*** TABLE 0.52*** 2.28*** 1.74*** 2 variable COUNTRIES is In AND (1 + 0.20 1890 (3.54) (1.98) (5.81) (1.70) (9.17) (2.68) (2.52) 1,268 0.96* -8.85** -0.49** the 1.79*** -0.96*** 0.32*** 1.43*** real value of imports of a given

-

7.21 1895COMMODITI 0.23 0.29 -0.02 1,163 (3.58) (4.24)(0.40) (2.87)(0.85) (9.51)(0.02) 1.32*** 0.28*** 1.68*** 1.45*** BY YEAR -2.741900 0.76 0.16 1.00 (0.36) (1.95) (2.17) (4.32)(1.14) (7.81)(1.02) 1,319 0.20* -0.77*** 1.25*** -0.91**

1.13 0.02 0.18 -0.29 1905 (1.72) (0.45) (4.35)(1.46) (0.18) -17.96* commodity).1,308 (9.45)(2.45) 3.23** -0.79*** 1.58***

1.21 -13.77 0.13 -0.02 -0.38 2.56 1910 (0.15) (1.06) (0.43) (3.00)(1.39) (7.81)(1.53) 1,234 -0.59** 1.46***


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not rule out the possibility thatthe growth of domestic import-substituting industriesaccounts for this.30 Distanceis estimatedto havebeen a significantdeterrentto importsfrom countriesfurtherfromthe United Statesover the entireperiodof observation. Likewise,the evidenceindicatesthatthe volume of U.S. importswas muchgreaterfromits morepopuloustradingpartners.Thiselasticityranged froma low of 1.17 in 1870 to a high of 2.66 in 1880. The evidencethatthe UnitedStatesimportedmorefromhigherpercapitaincomepartnersduring the sampleperiodis mixed.The estimatedcoefficientis never significantly less thanzero,andit is largeandstatisticallysignificantin 1870, 1875, 1890, and 1905. ESTIMATIONBY COMMODITYGROUP

The role of migrantstockandthe role of relativeincomeareexpectedto havevariedacrossthe differentstagesof manufacturingof goods andfoodstuffsandacrossthe differingdegreesof productdifferentiation.As argued earlier,consumergoods and processed foodstuffs,to the extenitthat they were importedto satisfy specifictastes,would have strongermigrantstock effects than crudeor semi-manufactured goods. Likewise, the Linderhypothesisis directedto explainingtradein differentiatedgoods ratherthanin crudeor standardizedproducts. We dividedour78 commoditiesinto five groupsusing criteriadescribed by Robert Lipsey:CrudeFoodstuffs,ProcessedFoodstuffs,CrudeMaterials, Semi-Manufactures,and Manufacturesfor Consumption.31The taste hypothesispredictsthatmigrantstockwill have its strongesteffects on the commoditiesofthe ProcessedFoodstuffsgroupandofthe Manufacturesfor Consumptiongroup and perhapson the Semi-Manufacturesgroup. The extent that migrantstock had a protradeeffect on crude goods or Semiandinformnation Manufacturesprovidessupportforthetransactions linkages. Table3 presentsthe resultsof estimatingour model acrossall countries andyearsby commoditygroup.Of key interestin this tablearethe fmdings for the MigrantStock,English Language,and RelativeIncome variables. The impact of migrantstock on importsof commoditiesin the Processed Foodstuffsandin the Manufacturesfor Consumptiongroupsareestimated to be highly statisticallysignificantand a strong 0.41 in magnitude.The 30Regardingthe conjectureof importsubstitutesbeingproduced,one mustconsiderthe growthin domesticproductionrelativeto thegrowthof importsofparticularproducts.Totalimportsas a percentage of GNP declinedduringthe period 1870 to 1910, but this does not directlyaddressthe issue of domestic productiondisplacingimportsof specific commodities.Evidencedoes exist thatdomestic productiondidreplaceimportsof steel railsandof tinplate(Irwin,"UnitedStates"),butsuchevidence cannotbe generalizedoffhand. 31 The specific compositionof each of these groupsis foundin the notes to Table3.

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Dunlevy and Hutchinson TABLE 3

ESTIMATIONRESULTS:ALL COUNTRIESAND YEARS, BY COMMODITYGROUP

Variable

Crude Foodstuffs

Processed Foodstuffs

Manufactures Crude Semifor Materials Manufactures Consumption

Intercept13: Absolutet-value MigrantStock

58.69 -13.47 -79.28 18.39 -94.39*** (0.90) (0.21) (1.42) (0.42) (2.68) 0.19 0.41*** 0.08 0.34*** 0.41*** (1.23) (4.66) (0.91) (5.44) (7.75) 2.97*** 0.77 2.67*** 2.08*** -0.09 EnglishLanguage (4.90) (1.41) (5.10) (5.25) (0.28) - 1.09*** -0.99*** -0.65*** -0.70*** Distance -0.72*** (5.01) (6.20) (3.81) (5.45) (6.50) -0.25 -0.92*** -0.42 -0.14 RelativeIncome -0.66*** (3.11) (1.56) (0.98) (0.73) (3.98) 1.88*** -1.21 3.12*** 2.55*** Per CapitaIncome1 1.65** (1.52) (2.30) (2.72) (5.99) (5.73) 1.55*** 0.84*** 0.83*** 1.56*** 1.97*** Population, (4.98) (5.48) (10.59) (14.01) (20.83) 0.74 3.17 3.75 -0.05 U.S.Per CapitaIncome 1.76 (0.16) (0.72) (0.94) (0.02) (0.69) 12.24 -14.03 -6.23 U.S. Population -11.81 16.68** (1.05) (0.48) (1.05) (1.33) (2.26) - 1.86** -0.68 1.10 RelativePrice -0.98 -0.93 (0.68) (2.23) (1.28) (1.51) (1.64) 1.43 -1.51 Year 0.18 1.04 -2.00** (0.96) (0.12) (1.17) (1.05) (2.45) 0.14 R2 0.20 0.16 0.28 0.32 d.f 1,195 1,298 1,808 2,266 2,640 * - statisticallysignificantat the 10 percentlevel. ** = statisticallysignificantat the 5 percentlevel. = statisticallysignificantat the 1 percentlevel. Notes: All variablesexcept the dummyand trendare in logarithms.The dependentvariableis the logarithmof (1 + the realvalue of importsof a given commodity). CrudeFoodstuffs comprisesbarley, cattle,cocoa,coffee,corn,fruitsandnuts,hops, nutmeg,tea,andwheat. ProcessedFoodstuffscomprisesbrandy,butter,cheese,processedfish, malt liquor,meat,mineral water,molasses,oil cake, sugar,tallow,wheat flour,andwine. CrudeMaterialscomprisesbristles,coal, copperore, cutchgum, roughdiamonds,raw hemp,hides, Indiarubber,licoriceroot,paperstock,silk cocoons,raw silk, timber,leaf tobacco,andraw wool. Semi-Manufactures comprisesalzarine,argol,asphaltandbitumen,bags,copperingots,dye woods anddyes, manufactured flax, furs(skins),glycerin,indigo,ironandsteel rails,leather,nitrateof soda, olive oil, cottontextiles,tin plate,wood pulp,wood (boardsandplanks),wool, andcarpet. Manufactures forConsumptioncomprisesagricultural implements,artworks,books,brushes,cigars, cottonmanufactures, andstoneware,cylinderglass earthenware cutlery,firearms,furs(manufactured), and silver plate glass, jewelry, perfume,smokerspipes, raspsand files, silk textiles, manufactured tobacco,watchesandparts,manufactured wood, andwool textiles. Source:Groupingsare based on those in tables A-13, B-8 and C-8 of Lipsey, Price and Quantity Trends.

impact of migrant stock on imports of the goods in the Semi-Manufactures group is a weaker 0.34, and it, too, is highly statistically significant. Although positive, the estimated coefficients of Migrant Stock on imports of


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CrudeFoodstuffsandCrudeMaterialsaresmallandnot statisticallysignificant. We take these resultsto be very strongevidence in favor of the consumertaste and informationlinkages,respectively. Thecoefficienton RelativeIncomeis negativefor everycommoditygroup andstatisticallysignificantfor CrudeFoodstuffsandManufacturesfor Consumption.TheseresultssupporttheLinderhypothesisin thecaseof Manufacturesfor Consumption;it also indicatesthatduringoursampleperiodAmericanimportsof crudematerialsweredisproportionately fromnationswithper capitaincomessimilarto thatofthe UnitedStates.Interestingly,importsof all groupsexceptCrudeMaterialsarealsofoundto havecomemoreheavilyfrom higher-percapita-incomenations.ThissuggeststhatAmericanimportsof all but crude goods tendedto come from more developednationswith higher ratios.WeakevidencesuggeststhattheCrudeFoodstuffswere capital-to-labor importedfromnationswith lowercapital-to-labor ratios. Englishlanguageis indicatedto have had a protradeeffect for the goods in the CrudeFoodstuffs,CrudeMaterials,and Semi-Manufactures groups. To the extentthatthis reflects ease of communication,betterinformation, and similaritiesof commerciallaw, it revealsevidence of anotherprotrade link amongthe tradingnationsof the late nineteenthcentury.The strength of the English-languageeffectappearsto be inverselyrelatedto the strength of the migrant-stockeffect. This may suggestthatmigrantstocksubstituted for commonlanguageamongBritishand Canadianimmigrants,especially as the level of productdifferentiationincreased. ESTIMATIONBY INDIVIDUALCOMMODITY

As a finalexercisewe estimatedthemodelforeachofthe 78 commodities separatelyover all years andall countries.These resultsare availablefrom the authors.We will limit our observationsto the roles played by Migrant Stockand by RelativeIncome. MigrantStockis estimatedto havehada positiveeffect on the quantityof the good importedfor 61 of the 78 commodities,andthe effect was statistically significantfor 35 of these commodities.The effect of MigrantStockis estimatedto have been statisticallysignificantand negativefor four commodities: tea, licorice root, raw silk, and silk cocoons. These four goods are

crudefoods andmaterialsthatcamefromrelativelynarrowregionalsources and had little migrant-specificconnection.Overall,evidence of a protrade migrant effect appears strong. Relative Income obtains a negative coefficient for 57 commodities and 18 of these are statistically different from zero. Many of these goods are finished, differentiatedproducts;others, however, would appearto be relatively standardized. For six commodities the estimated coefficient is statistically

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greaterthanzero: butter,raw silk, licorice root, paperstock, olive oil, and wood boardsandplanks.Theseresultsfor the relativeincomevariableprovide some supportfortheLinderhypothesisin theturnofthe centuryimport tradeof the United States. CONCLUSIONS

Duringthe periodfrom 1870to 1910,U.S. importsgrewat an annualreal rateof 3.9 percent.Immigrationgrew unevenlyover this period.Applying the theoreticalinsightsof JamesRauch,David Gould,andHeadandReis to this periodandusing the historicalanecdotesof Brown,Cottrell,andDiazAlejandro,we soughtevidenceofa directimmigrant-import tradenexusthat existedalongsidethefactorproportionsandspecificfactorslinkagesinvestigatedby Collins, O'Rourke,and Williamson. To this end we estimatedan augmentedgravitymodel using dataat the individual commodity level on the imports into the United States of 78 commoditiesfrom 17 countries,every fifth year between 1870 and 1910. MigrantStock, the numberof foreign born, by countryof birth,residing in the United States,is the key explanatoryvariablein ourstudy.We found thatMigrantStockis estimatedto have played an importantrole in determining the volume of U.S. importswhen the observationsare aggregated over all goods, countries,andyears. Likewise, MigrantStockis estimated to have played a key role in U.S. imports from Old Europeanand Non Europeancountries.Furthermore,when the model is estimatedover all countries and goods on a by-year basis, the protradeeffect of Migrant Stockis foundto have been importanteveryyearfrom 1870 through1900. We interpretthe failureof MigrantStockto explainimportsfromthe New Europeancountriesand its failureto explainimportsin 1905 and 1910 as connected to the dramaticshift that occurredin the source countries of immigrantsto the United States after approximately1895. Apparently, immigrantsfrom SouthernandEasternEuropefailed to develop the commercial links with their source countries that were central to the immigrant-trade relationship.We offer some explanationfor why this may have been so. We also estimatedthe model by commoditygroup and by individual commodity. The results obtained for the commodity-groupestimations providevery strongsupportfor the presenceof the immigranteffect during (the earlierpartof) our sampleperiod.The "taste"linkagethatis positedto underliethe immigrant-import linkagesuggeststhatthe protradeeffect of immigrantswill be especiallypowerfulin the caseof finishedanddifferentiated goods. This is preciselywhatwe fmd in our estimates.It appearsthat in the case of finishedfoodstuffsandfinishedmanufacturesthatan increase


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of MigrantStock(by nativity)of 10 percentincreasedimports,by source country,by over 4 percent.The effectwas not observedin the case of crude goods,andalthoughtheeffectwas foundfor semifniishedgoods,its strength was weaker. Evidenceis also offeredin supportof the protradeeffect of commonlanguagebetweenthe UnitedStatesandits tradingpartners.In the case of this particularstudy, English was the languagecommon to the United States, Canada,and Britain,so it is not possibleto say with any certaintythatthe observedeffectwas not dueto otherfactorscommonto thesethreecountries. We also providesome evidencein supportof the Linderthesis applying to U.S. importsin the late nineteenthandearlytwentiethcenturies.Again, the findingsvaryacrosscountryandyearcombinations.Nevertheless,there is a preponderanceof evidencethatthe UnitedStates,duringthis historical period,did importthe commoditiesin oursampleespeciallyfromcountries with per capitaincomes similarto thatfoundin the United States.

Appendix:Data Descriptions and Sources Importsiitis the value of imports of commodity i from countryj in year t. It is measured in 1913 real dollars. The current dollar values are from the US. Commerce andNavigation Reports for each year. These are divided by an index of U.S. import prices found in Williamson, American Growth. Migrant Stockjtis the number of persons born in countryj residing in the United States in year t. These data are available in Wilcox, International Migrations, for decenial years; mid-period years, such as 1875, are obtained by linear interpolation. For Brazil the number of all South American immigrants is used. US. Population is available for all years from Maddison, Monitoring the WorldEconomy. Populationj is available for most nationalities from Maddison, Monitoring the WorldEconomy. Spanish and Portuguese populations are from Mitchell, International Historical Statistics: Europe and have been interpolated to the years 1870 and so on. Mexican and Brazilian populations are from Mitchell, International Historical Statistics: The Americas, for selected years. Per Capita Incomej, is the ratio of real gross domestic product to population in countryj in year t. It is measured in thousands of dollars per person. Indices (1913 equals 100) of real GDP are available for various years and countries in Maddison, Dynamic Forces and Monitoring the WorldEconomy. These indices were adjusted using Maddison's values for 1913 GDP in 1985 dollars. Income data for Spain, Portugal, Russia, China, and Mexico are from Mitchell, International Historical Statistics: Europe, International Historical Statistics: Africa, and International Historical Statistics: The Americas. Distancej is measured in statute miles between the origin countlyj and the nearest U.S. port of entry. Imports from Europe are assumed to have entered the United States through New York, imports from Latin and South America through New Orleans, and imports from Asia through San Francisco. The distance to each of Canada and Mexico is arbitrarily set equal to 150 miles. English Languagej is a dummy variable equal to one if and only if countryj is Englishspeaking, that is, if the country is either Britain or Canada.

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RelativeIncomejtis the percentagedifferenceof relativeper capita income between the United Statesand country] in year t. It is the absolutevalue of the differencebetween United Statesper capitaincomeandthe percapitaincomeof countryjrelativeto the per capitaincome of]. RelativePricetis the relativedeliveredpriceof importsin yeart. It is computedas the U.S. unitvalue indexfor aggregateimportstimes (one plus the averageU.S. tariffrate)times an index of transportationcosts, all divided by the U.S. consumerprice index. This variable,it shouldbe emphasized,is neithercommoditynortradingpartnerspecific.Data for averagetariffs,unit values, and the AmericanCPI come from U.S. Departmentof interpolated Commerce,HistoricalStatistics,pp.211, 888-89); dataontransportcostare fromIsserlis,"TrampShippingCargoes." Yeartis a trendvariablethat rangesfromone to nine and correspondsto the years 1870, 1875, .. , through1910. REFERENCES

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