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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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  1. Larry Chavis & Phillip Leslie, 2009. "Consumer boycotts: The impact of the Iraq war on French wine sales in the U.S," Quantitative Marketing and Economics, Springer, vol. 7(1), pages 37-67, March.
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  8. Guy Michaels & Xiaojia Zhi, 2007. "Freedom fries," LSE Research Online Documents on Economics 51598, London School of Economics and Political Science, LSE Library.
  9. Disdier, Anne-Celia & Mayer, Thierry, 2007. "Je t'aime, moi non plus: Bilateral opinions and international trade," European Journal of Political Economy, Elsevier, vol. 23(4), pages 1140-1159, December.
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