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Freedom Fries

  • Guy Michaels
  • Xiaojia Zhi

Do firms always choose the cheapest suitable inputs, or can group attitudes affect their choices? To investigate this question, we examine the deterioration of relations between the United States and France from 2002-2003, when France's favorability rating in the US fell by 48 percentage points. We estimate that the worsening attitudes reduced bilateral trade by about 9 percent and that trade in inputs probably declined similarly, by about 8 percent. We use these estimates to calculate the average decrease in firms' willingness to pay for French (or US) commodities when attitudes worsened. (JEL D24, F13, F14, L14, L21)

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Article provided by American Economic Association in its journal American Economic Journal: Applied Economics.

Volume (Year): 2 (2010)
Issue (Month): 3 (July)
Pages: 256-81

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Handle: RePEc:aea:aejapp:v:2:y:2010:i:3:p:256-81
Note: DOI: 10.1257/app.2.3.256
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  8. Guy Michaels & Xiaojia Zhi, 2010. "Freedom Fries," American Economic Journal: Applied Economics, American Economic Association, vol. 2(3), pages 256-81, July.
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  16. Petra Moser, 2008. "An Empirical Test of Taste-based Discrimination Changes in Ethnic Preferences and their Effect on Admissions to the NYSE during World War I," NBER Working Papers 14003, National Bureau of Economic Research, Inc.
  17. Bandiera, Oriana & Barankay, Iwan & Rasul, Imran, 2009. "Social Connections and Incentives in the Workplace: Evidence from Personnel Data," CEPR Discussion Papers 7114, C.E.P.R. Discussion Papers.
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