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State Visits and International Trade
Author(s) -
Nitsch Volker
Publication year - 2007
Publication title -
world economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.594
H-Index - 68
eISSN - 1467-9701
pISSN - 0378-5920
DOI - 10.1111/j.1467-9701.2007.01062.x
Subject(s) - gravity model of trade , state (computer science) , bilateral trade , causality (physics) , border effect , gravity equation , exploratory analysis , economics , international trade , exploratory research , demographic economics , control (management) , international economics , geography , sociology , physics , data science , archaeology , algorithm , quantum mechanics , computer science , anthropology , china , management
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.