The destinations of state trade missions

Abstract

From 1997 to 2006, US state governors led more than 500 trade missions to foreign countries. Trade missions are potentially a form of public investment in export promotion. I create a theory of public investment by introducing government to a Melitz (2003)-Chaney (2008) model. Controlling for state and country characteristics, the model accounts for the frequency and destination of trade missions and predicts a positive relationship between missions and exports by destination. By collecting data on trade mission origins and destinations, I estimate this relationship in the data and find that mission destinations are qualitatively consistent with the model.