This paper estimates the effects of bilateral and time-varying preference bias on trade flows and welfare. We use a unique dataset from the BBC World Opinion Poll that surveys (annually during 2005-2017 with some gaps) the populations from a wide array of countries on their views of whether an evaluated country is having a mainly positive or negative influence in the world. We identify the effects on bilateral preference parameters due to shifts in these country image perceptions, and quantify their general equilibrium effects on bilateral exports and welfare (each time for an evaluated exporting country, assuming that the exporting country's own preference parameters have not changed). We consider five important shifts in country image: the George W. Bush effect, the Donald Trump effect, the Senkaku Islands Dispute effect, the Brexit effect, and the Good-Boy Canadian effect. We find that such changes in bilateral country image perceptions have quantitatively important trade and welfare effects. The negative impact of Donald Trump's ``America First'' campaign rhetorics on the US' country image might have cost the US as much as 4% of its total exports and gains from trade. In contrast, the consistent improvement of Canadian country image between 2010 and 2017 has amounted to more than 10% of its total welfare gains from trade.
Country Image; Consumer Preferences; Trade Flows; Quantitative Welfare Analysis
Behavioral Economics | International Economics
Singapore Management University, SMU Economics and Statistics Working Paper Series, Paper No. 03-2018
CHANG, Pao-Li; FUJII, Tomoki; and JIN, Wei.
Does “America First'' help America? The impact of country image on exports and welfare. (2017). 1-60. Research Collection School Of Economics.
Available at: http://ink.library.smu.edu.sg/soe_research/2145
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