DP4953 The Foreign Service and Foreign Trade: Embassies as Export Promotion

Author(s): Andrew K Rose
Publication Date: March 2005
Keyword(s): consulate, country, data, destination, empirical, gravity, import, international, panel
JEL(s): F13
Programme Areas: International Trade and Regional Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=4953

As communication costs fall, foreign embassies and consulates have lost much of their role in decision-making and information-gathering. Accordingly, foreign services are increasingly marketing themselves as agents of export promotion. I investigate whether exports are in fact systematically associated with diplomatic representation abroad. I use a recent cross-section of data covering 22 large exporters and 200 import destinations. Bilateral exports rise by approximately 6-10% for each additional consulate abroad, controlling for a host of other features including reverse causality. The effect varies by exporter, and is non-linear; consulates have smaller effects than the creation of an embassy.