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Research report

Does Bilateral Trust Affect International Movement of Goods and Labor?

BP2-STS

    30.04.2013

40

Bilateral trust
International migration
International trade
Instrumental variables
Somatic distance
English Trust in the citizens of a potential partner country may affect the decision to trade with or to migrate to a foreign country. This paper employs panel data to examine the causal impact of such bilateral trust on international trade and migration patterns. We apply instrumental variables (IV) approaches that capture the exogenous variance of bilateral trust separately with eight indicators of genetic ("somatic") distance between country-pairs. These indicators work equally well at the first stage. However, second-stage results very much depend on the exact measure employed as instrument. Overall, we find little evidence that bilateral trust affects international movements of goods and labor. More generally, we highlight the potential fragility of IV estimations even when the instruments seem plausible on theoretical grounds and when standard statistical tests confirm their validity.
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Faculty
Faculté des sciences économiques et sociales et du management
Language
  • English
Classification
Economics
Series statement
  • Working Papers SES ; 442
License
License undefined
Identifiers
  • RERO DOC 31954
  • RERO R007291357
Persistent URL
https://folia.unifr.ch/unifr/documents/302976
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