Face-to-Face Exports: The Role of Business Travel in Trade Promotion

Abstract

In this study, we investigate the contribution of international business travel to U.S. exports. We present a Dixit-Stiglitz monopolistic competition model that relates business travel to the volume of international trade. Then we estimate the parameters of the model. To avoid the likely bias in OLS estimation, we develop an instrumental variable estimator. We find that lowering the costs of business travel to a country will have a significant positive impact on U.S. commodity exports to the visited country. The elasticity of exports with respect to international business travel is approximately 0.46. Using this estimate, we calculate that each additional international business trip will increase U.S. commodity exports to the visited country by $36,693 per year on average. © 2012 SAGE Publications.