The Foreign Service and Foreign Trade: Embassies as Export Promotion

摘要

In this short paper, I ask a simple question: is the presence of foreign missions systematically linked to a country's exports? Using a bilateral gravity model of trade, the answer is positive; holding other factors constant, exports seems to rise between six and ten per cent for each additional consulate. I find evidence that the creation of the embassy has a substantially larger impact on exports than additional consulates. This non-linearity, along with the cross-country heterogeneity, and reverse causality I have found are all technical issues that merit further research. There is also an interesting economic issue that I have not attempted to address. Embassies, consulates and the like purport to do a host of functions; this paper has considered only one. Are the benefits of any trade creation sufficient to justify any reasonable fraction of the costs of the Foreign Service? I leave such question for others to address in future research.