Title

International Friends and Enemies

Author(s)

Benny Kleinman Benny Kleinman (Princeton University)

Ernest Liu Ernest Liu (Princeton University)

Stephen J. Redding Stephen Redding (Princeton University)

Abstract

We examine whether as countries become more economically dependent on a trade partner, they realign politically towards that trade partner. We use network measures of economic exposure to foreign productivity growth derived from the class of trade models with a constant trade elasticity. We establish causality using two different sources of quasi-experimental variation: China's emergence into the global economy and the reduction in the cost of air travel over time. In both cases, we find that increased economic friendship causes increased political friendship, and that our theory-based network measures dominate simpler measures of trading relationships between countries.

Creation Date

2022-03

Section URL ID

Paper Number

292

URL

https://gceps.princeton.edu/wp-content/uploads/2022/04/wp292_Redding-et-al.pdf

File Function

Jel

F14, F15, F50

Keyword(s)

international relations, trade, productivity growth, real income

Suppress

false

Series

3