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State Visits and International Trade

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  • Volker Nitsch

Abstract

Politicians travel extensively abroad, for various reasons. One purpose of external visits is to improve bilateral economic relations. In this paper, I examine the effect of state visits on international trade. Based on a large data set that covers the travel activities of the heads of state of France, Germany and the United States for the period from 1948 to 2003, I find that state and official visits are indeed positively correlated with exports. I first apply a gravity model of trade to control for other trade determinants and find that a visit is typically associated with higher exports by about 8 to 10 per cent; the results are sensitive to the type of visit (as they should). I then use a differences‐in‐differences specification to deal with the issue of reverse causality. The results show a strong, but short‐lived effect of visits on bilateral exports growth, which is driven by repeated visits to a country. Additional support is provided by an exploratory instrumental vari‐ables analysis.

Suggested Citation

  • Volker Nitsch, 2007. "State Visits and International Trade," The World Economy, Wiley Blackwell, vol. 30(12), pages 1797-1816, December.
    • Handle: RePEc:bla:worlde:v:30:y:2007:i:12:p:1797-1816
    DOI: 10.1111/j.1467-9701.2007.01062.x
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    1. James E. Anderson & Eric van Wincoop, 2003. "Gravity with Gravitas: A Solution to the Border Puzzle," American Economic Review, American Economic Association, vol. 93(1), pages 170-192, March.
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    4. Andrew K. Rose, 2007. "The Foreign Service and Foreign Trade: Embassies as Export Promotion," The World Economy, Wiley Blackwell, vol. 30(1), pages 22-38, January.
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    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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