It has been emphasized that international promotion activities such as state visits or the presence of embassies, consulates and export promotion agencies help foster trade when there are search costs and/or uncertainty. In this paper we try to disentangle the differential effect that foreign service (embassies and consulates) has on both the establishment of trade links with countries, and the effect on trade volumes with already existing trading partners (the extensive and intensive margins at the country level). Using the estimation procedure suggested by Helpman, Melitz and Rubinstein (2007) and a cross-section of 21 exporters and 162 importers as in Rose (2005), we find that the presence of a foreign service office in a given country increases the probability of trading with that partner between 11% and 18%, but that it has no effect on the volume of trade with already existing trading partners. We then proceed to evaluate the importance of the extensive margin at the sectoral level, finding that these probabilities are substantially larger for more differentiated sectors.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
For technical questions regarding this item, or to correct its listing, contact: (María D. González. Electronic Dissemination of Information Unit. Research Department. Banco de España).
Find related papers by JEL classification: F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations F15 - International Economics - - Trade - - - Economic Integration F55 - International Economics - - International Relations and International Political Economy - - - International Institutional Arrangements
This paper has been announced in the following NEP Reports:
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.: