School of Economic Sciences - Washington State University

It is feasible to take the log of ˜X ij because each country has a continuum of varieties and there isno real valued upper support on the productivity distribution. There is always a mass of exporting(firms L ij = L i 1 − H( ˆφij ) ) > 0 regardless of the size of ˆφ ij .Equation (8) shows the relationship between bilateral state exports and bilateral state trademissions controlling for state and country characteristics, d i and g j . The reduced form equation (8)predicts the export elasticity of trade missions is one relative to each state-country pair. Howeverthis is with respect to M ij .The variation in the model comes from the bilateral trade costs τ ij and f ij . Since state andcountry characteristics are accounted for by d i and g j , the variation in X ij is driven by the qualityof state-country matches in τ ij and f ij . For reasons outside of the model, some state-country pairshave a good match, and thus there is a large export relationship and a strong motive for sendingtrade missions. Other state-country pairs are not a good match. The quality of the match may bethought of as the relative geography or the relative immigrant history of state-country pairs.3 A Description of the DataEquation (8) relates actual state exports to actual state trade missions (plus z) controlling for stateand country characteristics. To see if the estimate for the export elasticity of missions is positiveas it is in (8) requires state level data on trade missions and exports by destination. I compilethe trade missions data by searching through local media sources from all states for 1997–2006.Appendix B contains the details of the trade mission collecting process. State export data comesfrom a data set compiled by the U.S. Bureau of the Census that is rarely used in the internationaltrade literature. It is the Origin of Movement (OM) state export data available for purchase fromthe World Institute of Strategic Economic Research. Cassey (2009) provides the details for thecollection of the OM data.The OM data are the only state export data with the destinationinformation available.14