Freedom Fries | Zendy

Guy Michaels | Zendy; Xiaojia Zhi | Zendy

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Freedom Fries

Author(s) -

Guy Michaels,

Xiaojia Zhi

Publication year - 2010

Publication title -

american economic journal applied economics

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 12.996

H-Index - 82

eISSN - 1945-7782

pISSN - 1945-7790

DOI - 10.1257/app.2.3.256

Subject(s) - fell , french fries , affect (linguistics) , economics , psychology , demographic economics , geography , chemistry , cartography , food science , communication

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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