Sizing Up the Impact of Embassies on Exports
AbstractThe purpose of this study is to test for the effects of trade promotion via the foreign service. We develop a Melitz-based model where firms are heterogeneous with respect to productivity and must pay a beachhead cost to enter a foreign market, which can be reduced by government spending on trade promotion. The model predicts that unilateral trade promotion allows medium-sized firms to export. We test this prediction using Swedish firm-level data and information on the opening and closing of Swedish embassies abroad using Norwegian firms as control group. Our results lend support to the predictions of the model, with large and medium-sized firms responding most strongly to the opening of embassies.
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Bibliographic InfoPaper provided by Research Institute of Industrial Economics in its series Working Paper Series with number 1012.
Length: 24 pages
Date of creation: 04 Mar 2014
Date of revision:
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Heterogeneous firms; Trade promotion;
Other versions of this item:
- D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
- D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
- F15 - International Economics - - Trade - - - Economic Integration
This paper has been announced in the following NEP Reports:
- NEP-ALL-2014-03-22 (All new papers)
- NEP-BEC-2014-03-22 (Business Economics)
- NEP-INT-2014-03-22 (International Trade)
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