Do Leader’s Visits Increase Trade Flows?

Kodila-Tedika, Oasis and Khalifa, Sherif (2021): Do Leader’s Visits Increase Trade Flows?

Abstract

This paper examines the effect of the number of visits by U.S. officials to a country, and the number of visits of the country’s leaders to the United States, on bilateral trade flows between the country and the United States. To achieve our objective, we compile novel variables that indicate the number of official visits from 1960-2015 from the historical archives of the U.S. State Department. To deal with potential endogeneity, we use instrumental variables panel data techniques such as dynamic GMM and systems GMM estimations. The estimation results show that the visits by U.S. Presidents and Secretaries of State do not have a statistically significant effect on bilateral trade flows, while the leader’s trips to the United States have a statistically significant positive effect. This indicates that the leader’s trips to the United States are taken as an opportunity to promote free bilateral trade flows between the country and the United States, while the visits of American officials focus on other issues.

• Item Type: MPRA Paper
• Language: English
• Keywords: Trade, Executive, Leader’s Trips
• Subjects: F - International Economics > F1 - Trade > F10 - General; H - Public Economics > H1 - Structure and Scope of Government > H11 - Structure, Scope, and Performance of Government

References

Acemoglu, Daron and Pierre Yared. “Political Limits to Globalization.” American Economic Review: Papers & Proceedings, 100: 83–88, 2010.

Arellano, M, and Bond S. “Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations.” Review of Economic Studies, 58(2): 277–97, 1991.

Berger, Daniel, William Easterly, Nathan Nunn and Shanker Satyanath, "Commercial Imperialism? Political Influence and Trade during the Cold War." American Economic Review, 103(2): 863-896, 2013.

Blundell, R. and S. Bond. "Initial Conditions and Moment Restrictions in Dynamic Panel Data Models". Journal of Econometrics. 87 (1): 115–143, 1998.

Cooray, Arusha, Chandan Jha, and Bibhudutta Panda. “Corruption and Assortative Matching of Partners in International Trade.” WIDER Working Paper 114, 2020. Creusen, Harold and Arjan Lejour. “Market Entry and Economic Diplomacy,” Applied Economics Letters. 20 (5): 504‐507, 2013.

Faqin Lin, Wenshou Yan and Xiaosong Wang. "The Impact of Africa-China's Diplomatic Visits on Bilateral Trade," Scottish Journal of Political Economy, 64(3): 310-326, 2017.

Fuchs, Andreas and Nils‐Hendrik Klann. “Paying a Visit: The Dalai Lama Effect on International Trade,” Journal of International Economics, 91: 164‐177, 2013.

Guiso, Luigi, Paola Sapienza and Luigi Zingales. “Cultural Biases and Economic Exchange.” The Quarterly Journal of Economics, 124(3): 1095-1131, 2009.

Head, Keith and John Ries. “Do Trade Missions Increase Trade?” Canadian Journal of Economics. 43: 754‐775, 2010.

Head, Keith and Thierry Mayer. “Gravity Equations: Workhorse, Toolkit, and Cookbook”. In: Handbook of International Economics, 4: 131–195, 2014.

Helpman, Elhanan, Marc Melitz, and Yona Rubinstein. “Estimating Trade Flows: Trading Partners and Trading Volumes” The Quarterly Journal of Economics, 123(2): 441–487, 2008.

Kono, Daniel. 2006. “Optimal Obfuscation: Democracy and Trade Policy Transparency.” American Political Science Review, 100 (3): 369–84, 2006.

Mansfield, Edward, Helen Milner, and Peter Rosendorff. “Free to Trade: Democracies, Autocracies, and International Trade.” American Political Science Review, 94 : 305–322, 2000.

Nitsch, Volker and Dieter Schumacher. “Terrorism and International Trade: An Empirical Investigation.” European Journal of Political Economy, 20, 423–433, 2004.

Nitsch, Volker. "Passport, please! Travels, Travails and Trade," Applied Economics Letters, 26(15) : 1274-1278, 2019.

Nitsch, Volker. “State Visits and International Trade,” The World Economy, 30: 1797‐1816, 2007.

Michaels, Guy and Xiaojia Zhi. “Freedom Fries.” American Economic Journal: Applied Economics, 2: 256–281, 2010.

Paudel, Ramesh, and Arusha Cooray. “Export Performance of Developing Countries: Does Landlockedness Matter?” Review of Development Economics, 22: e36–e62, 2018.

Pollins, Brian. “Does Trade Still Follow the Flag?” American Political Science Review, 83: 465–480, 1989.

Rose, Andrew. “The Foreign Service and Foreign Trade: Embassies as Export Promotion.” The World Economy, 30: 22‐38, 2007.

Silva, Santos and Silvana Tenreyro. “The Log of Gravity”. The Review of Economics and Statistics, 88(4): 641–658, 2006.

Yotov, Yoto, Roberta Piermartini, José-Antonio Monteiro and Mario Larch. An Advanced Guide to Trade Policy Analysis: The Structural Gravity Model. World Trade Organization, 2016.