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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. Copyright 2007 The Author Journal compilation Blackwell Publishing Ltd. 2007 .

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
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    References listed on IDEAS

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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.
    2. Andrew K. Rose, 2004. "Do We Really Know That the WTO Increases Trade?," American Economic Review, American Economic Association, vol. 94(1), pages 98-114, March.
    3. 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.
    4. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2004. "How Much Should We Trust Differences-In-Differences Estimates?," The Quarterly Journal of Economics, Oxford University Press, vol. 119(1), pages 249-275.
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    JEL classification:

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

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