State Visits and International Trade

20 Pages Posted: 15 Nov 2007

See all articles by Volker Nitsch

Volker Nitsch

Darmstadt University of Technology - Department of Law and Economics; CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

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Abstract

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 variables analysis.

Suggested Citation

Nitsch, Volker, State Visits and International Trade. The World Economy, Vol. 30, No. 12, pp. 1797-1816, December 2007, Available at SSRN: https://ssrn.com/abstract=1029816 or http://dx.doi.org/10.1111/j.1467-9701.2007.01062.x

Volker Nitsch (Contact Author)

Darmstadt University of Technology - Department of Law and Economics ( email )

Marktplatz 15
Residenzschloss
Darmstadt, 64283
Germany

CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Poschinger Str. 5
Munich, DE-81679
Germany

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