Insights in Economical Complexity in Spain: the hidden boost of migrants in international tradings

TL;DR

This paper demonstrates that migrants significantly enhance Spain's international trade diversification by acting as social links that reduce transaction costs, with a phase transition occurring at a critical migrant threshold.

Contribution

It introduces a physically-inspired, quantitative analysis showing how migrant networks influence trade diversification and identifies a critical threshold for migrant impact.

Findings

Migrant networks facilitate trade diversification in Spain.

A phase transition occurs at a specific migrant threshold.

Interaction patterns exhibit small-world network features.

Abstract

We consider extensive data on Spanish international trades and population composition and, through statistical-mechanics and graph-theory driven analysis, we unveil that the social network made of native and foreign-born individuals plays a role in the evolution and in the diversification of trades. Indeed, migrants naturally provide key information on policies and needs in their native countries, hence allowing firm's holders to leverage transactional costs of exports and duties. As a consequence, international trading is affordable for a larger basin of firms and thus results in an increased number of transactions, which, in turn, implies a larger diversification of international traded products. These results corroborate the novel scenario depicted by "Economical Complexity", where the pattern of production and trade of more developed countries is highly diversified. We also address a central question in Economics, concerning the existence of a critical threshold for migrants (within a given territorial district) over which they effectively contribute to boost international trades: in our physically-driven picture, this phenomenon corresponds to the emergence of a phase transition and, tackling the problem from this perspective, results in a novel successful quantitative route. Finally, we can infer that the pattern of interaction between native and foreign-born population exhibits small-world features as small diameter, large clustering, and weak ties working as optimal cut-edge, in complete agreement with findings in "Social Complexity".