Soft power and exports

Andrew Rose

Review of International Economics, 2019, vol. 27, issue 5, 1573-1590

Abstract: This paper seeks to help establish a stylized fact: a country’s exports rise when its leadership is approved by other countries. I show this using a standard gravity model of bilateral exports, a panel of data from 2006 through 2017, and an annual Gallup survey that asks people in up to 157 countries whether they approve of the job performance of the leadership of China, Germany, Russia, the United Kingdom and the United States. Holding other things constant, a country’s exports are higher if its leadership is approved by the importer—“soft power” promotes exports. The soft power effect is statistically and economically significant; a 1% increase in leadership approval raises exports by around two‐thirds of a percent. This effect is reasonably robust, and different measures of soft power deliver similar results. I conservatively estimate that the >20 percentage point decline in foreign approval of American leadership between 2016 (the final year of Obama’s presidency) and 2017 (Trump’s first year) lowered American exports by at least U.S.$3 billion.

Date: 2019
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