Critically important: the heterogeneous effect of diplomatic tensions on trade

Hinz, Julian and Leromain, Elsa (2020) Critically important: the heterogeneous effect of diplomatic tensions on trade. Review of Industrial Organization, 57 (2). 309 - 331. ISSN 0889-938X

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Abstract

With global value chains interlocking today’s economies, what is the impact of diplomatic tensions on international trade? We exploit variation in monthly data on imports, a measure of imported input use in the domestic economy, and the incidence of bilateral diplomatic tensions to show that their impact on trade is heterogeneous across countries and industries. Trade in industries that are crucial for domestic production is more sensitive to political tensions. We expose the underlying mechanism in a simple framework before testing it in reduced form.

Item Type:	Article
Official URL:	https://www.springer.com/journal/11151
Additional Information:	© 2020 The Authors
Divisions:	Centre for Economic Performance
Subjects:	J Political Science > JZ International relations H Social Sciences > HD Industries. Land use. Labor
Date Deposited:	29 Jul 2020 12:24
Last Modified:	08 May 2024 20:26
URI:	http://eprints.lse.ac.uk/id/eprint/105817

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