Freedom Fries

Guy Michaels and Xiaojia Zhi

American Economic Journal: Applied Economics, 2010, vol. 2, issue 3, 256-81

Abstract: Do firms always choose the cheapest suitable inputs, or can group attitudes affect their choices? To investigate this question, we examine the deterioration of relations between the United States and France from 2002-2003, when France's favorability rating in the US fell by 48 percentage points. We estimate that the worsening attitudes reduced bilateral trade by about 9 percent and that trade in inputs probably declined similarly, by about 8 percent. We use these estimates to calculate the average decrease in firms' willingness to pay for French (or US) commodities when attitudes worsened. (JEL D24, F13, F14, L14, L21)

JEL-codes: D24 F13 F14 L14 L21 (search for similar items in EconPapers)
Date: 2010
Note: DOI: 10.1257/app.2.3.256
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Citations: View citations in EconPapers (59)

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Related works:
Working Paper: Freedom Fries (2007)
Working Paper: Freedom Fries (2007)
Working Paper: Freedom fries (2007)
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