Working Paper No. 1012

Sizing Up the Impact of Embassies on Exports

Published: March 4, 2014Pages: 24Keywords: Heterogeneous firms; Trade promotionJEL-codes: D21;D22; F12; F15

Sizing Up the Impact of Embassies on Exports Shon Ferguson and Rikard Forslid


The purpose of this study is to test for the effects of trade promotion via the foreign service. We develop a Melitz-based model where firms 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 firms to export. We test this prediction using Swedish firm-level data and information on the opening and closing of Swedish embassies abroad using Norwegian firms as control group. Our results lend support to the predictions of the model, with large and medium-sized firms responding most strongly to the opening of embassies.

Shon Ferguson

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Andreas Bergh, IFN and Lund University, is one of the authors of this book. The Timbro Sharing Economy Index is the first global index of the sharing economy. The index has been compiled using traffic volume data and scraped data, and provides a unique insight into the driving factors behind the peer-to-peer economy.

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