NBER

Benny Kleinman

Department of Economics
Julis Romo Rabinowitz Building
Princeton, NJ 08544
Tel: 6095106056

E-Mail: EmailAddress: hidden: you can email any NBER-related person as first underscore last at nber dot org
Institutional Affiliation: Princeton University

NBER Working Papers and Publications

July 2020International Friends and Enemies
with Ernest Liu, Stephen J. Redding: w27587
We develop sufficient statistics of countries' bilateral income and welfare exposure to foreign productivity shocks that are exact for small shocks in the class of models with a constant trade elasticity. For large shocks, we characterize the quality of the approximation, and show it to be almost exact. We compute these sufficient statistics for over 140 countries from 1970-2012. We show that our exposure measures depend on market-size, cross-substitution and cost of living effects. As countries become greater economic friends in terms of welfare exposure, they become greater political friends in terms of United Nations voting and strategic rivalries.

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