Paying a Visit: The Dalai Lama Effect on International Trade
University of Heidelberg - Alfred Weber Institute for Economics
University of Goettingen (Gottingen) - Department of Economics
October 19, 2010
Center for European Governance and Economic Development Research Paper No. 113
The Chinese government frequently threatens that meetings between its trading partners’ officials and the Dalai Lama will be met with animosity and ultimately harm trade ties with China. We run a gravity model of exports to China from 159 partner countries between 1991 and 2008 to test to which extent bilateral tensions affect trade with autocratic China. In order to account for the potential endogeneity of meetings with the Dalai Lama, the number of Tibet Support Groups and the travel pattern of the Tibetan leader are used as instruments. Our empirical results support the idea that countries officially receiving the Dalai Lama at the highest political level are punished through a reduction of their exports to China. However, this ‘Dalai Lama Effect’ is only observed for the Hu Jintao era and not for earlier periods. Furthermore, we find that this effect is mainly driven by reduced exports of machinery and transport equipment and that it disappears two years after a meeting took place.
Number of Pages in PDF File: 48
Keywords: International Trade, International Political Economy, Diplomatic Relations, Exports to China, Tibet, Dalai Lama
JEL Classification: F13, F51, F59
Date posted: October 20, 2010 ; Last revised: April 27, 2011
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