Sizing Up the Impact of Embassies on Exports

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may AbstractThe purpose of this study is to test for the e¤ects of trade promotion via the foreign service. We develop a Melitz-based model where …rms are heterogeneous with respect to productivity and must pay a beachhead cost to enter a foreign market, which can be reduced by government spending on trade promotion. The model predicts that unilateral trade promotion allows medium-sized …rms to export. We test this prediction using Swedish …rm-level data and information on the opening and closing of Swedish embassies abroad using Norwegian …rms as control group. Our results lend support to the predictions of the model, with large and medium-sized …rms responding most strongly to the opening of embassies.JEL Classi…cation: D21, D22, F12, F15

Effects of cultural institutes on bilateral trade and FDI flows: Cultural diplomacy or economic altruism?

“…Among the few, Rose () finds a significantly positive effect of foreign embassies on home country exports. Likewise, Ferguson and Forslid () show that the number of Swedish exporters to a given destination increases significantly after the opening of a new Swedish embassy. In a meta‐analysis, Moons and van Bergeijk () report that economic diplomacy through embassies, consulates, other diplomatic facilities, investment and export promotion offices, trade and state visits has a significantly positive effect on trade and investment flows.…”