Do Ambassadors Matter? The effect of ambassadors on trade promotion

Franco Riottini Depetris
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Franco Riottini Depetris: Department of Economics, Universidad de San Andrés

No 15, Young Researchers Working Papers from Universidad de San Andres, Departamento de Economia

Abstract: This paper examines the impact of ambassadors on trade promotion, utilizing the 2012 Paraguayan political crisis as a natural experiment. Using highly disaggregated customs data and a difference-in-differences approach, I analyse how the unexpected withdrawal of Argentina's ambassador affected bilateral trade patterns. My findings reveal that the ambassador's absence led to a significant decrease in Paraguay's imports from Argentina, primarily driven by reductions in the extensive margin of trade. I observed a 3% decline in the number of suppliers and a 5% decrease in the number of imported products. To elucidate the mechanisms, I analyse data on commercial and specific actions undertaken by the Argentine embassy in Paraguay. Results indicate that the ambassador's absence corresponded with a substantial decrease in both major trade events and smaller, targeted activities, despite no change in the embassy's budget allocation. The analysis is robust to various specifications, including different regional samples and trade volume thresholds. This research contributes to the literature on economic diplomacy by providing causal evidence of ambassadors' role in facilitating international trade, particularly in establishing new trade relationships.

Keywords: International Trade; Economic Diplomacy; Trade Promotion; Ambassadorial Impact; Extensive Margin of Trade; Natural Experiment; Diplomatic Relations; Export Diversification; Trade Policy; Bilateral Trade; Developing Economies; Difference-in-Differences (search for similar items in EconPapers)
JEL-codes: F10 F13 F14 F51 F55 F59 O19 O24 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2024-07, Revised 2024-08
New Economics Papers: this item is included in nep-int
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Persistent link: https://EconPapers.repec.org/RePEc:sad:ypaper:15

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