Affinity and International Trade
AbstractThis paper examines the impact of American public attitudes toward foreign countries on the volume of trade. The issue is whether popular attitudes, as elicited in these surveys, convey any information about trust, risk, or transactions costs beyond what can be explained through standard economic models. The results of this paper suggest that they do, with a one standard deviation increase in warmth of feeling associated with a 20 to 31 percent larger trade volume when evaluated at the sample means. These public attitudes are in turn correlated with indices of cultural affinity and political ideology. A one standard deviation increase in the democracy score is associated with a 5 to 7 percent increase in trade. There might be additional secondary effects if democratization was associated with an increased likelihood of the removal of sanctions or the initiation of preferential trade relations.
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Bibliographic InfoPaper provided by Peterson Institute for International Economics in its series Working Paper Series with number WP05-3.
Date of creation: Jun 2005
Date of revision:
international trade; gravity model; trust; risk;
Find related papers by JEL classification:
- F1 - International Economics - - Trade
- F2 - International Economics - - International Factor Movements and International Business
- Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Social and Economic Stratification
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-01-01 (All new papers)
- NEP-INT-2006-01-01 (International Trade)
- NEP-POL-2006-01-01 (Positive Political Economics)
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