Good names beget favors: The impact of country image on trade flows and welfare

Author

Pao-Li CHANG, Singapore Management UniversityFollow
Tomoki FUJII, Singapore Management UniversityFollow
Wei JIN, Nankai University

Publication Type

Journal Article

Version

acceptedVersion

Publication Date

10-2022

Abstract

This paper estimates the effects of time-varying consumer preference bias on trade flows and welfare. We use a unique data set from the BBC World Service Poll, which surveys (annually during 2005–2017 with some gaps) the populations of 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 consumer 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, holding the exporting country’s own preference parameters constant). 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 rhetoric on the U.S.’s country image might have cost the United States 4%–5% of its total exports and welfare gains from trade. In contrast, the consistent improvement of Canada’s country image between 2010 and 2017 has amounted to more than 8% of its total welfare gains from trade.

Keywords

Country Image, Consumer Preferences, Trade Flows, Quantitative Welfare Analysis

Discipline

International Economics | Public Economics | Social Welfare

Research Areas

International Economics

Publication

Management Science

Volume

68

Issue

10

First Page

7555

Last Page

7596

ISSN

0025-1909

Identifier

10.1287/mnsc.2021.4250

Publisher

Institute for Operations Research and Management Sciences

Citation

CHANG, Pao-Li; FUJII, Tomoki; and JIN, Wei. Good names beget favors: The impact of country image on trade flows and welfare. (2022). Management Science. 68, (10), 7555-7596.
Available at: https://ink.library.smu.edu.sg/soe_research/2517

Copyright Owner and License

Authors

Creative Commons License

This work is licensed under a Creative Commons Attribution-NonCommercial-Share Alike 4.0 International License.

Additional URL

https://doi.org/10.1287/mnsc.2021.4250