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trade missions do not have an impact on state exports to the visited country on average.The conflicting results from the literature are due to features of the panel data they use. First,on the state level, the large amount of noise in the export data may overwhelm a reasonablysized effect in state exports from a trade mission; the imprecision of the estimates may hide asignificant impact. Second, the timing of the treatment is difficult to pin down because missionsoccur frequently, as in the case of Tennessee and Japan. The lag time for its effects is unknown.Most importantly, the literature does not have an explicit theory for how missions affect exports.The potential endogeneity of missions and exports does not allow for a suitable exogenous treatment.Thus estimation of the average impact of a trade mission on exports to the visited country usingpanel data differences has not yielded a convincing estimate.2 A Model of State Exports with Trade Missions2.1 The Melitz-Chaney Model of International TradeConsider the model described in Chaney (2008). This model features asymmetric countries differingin market specific entry costs. Chaney expands the model introduced by Melitz (2003) in whichmonopolistic competitors, differing in productivity, decide whether to export or not. 3 The model iscross-sectional and there is neither aggregate nor individual uncertainty.There are J countries differing in endowments of the only resource, labor. The endowment isdenoted as N j for each country j. Labor is immobile across countries.Consumers in all countries have identical preferences and may be aggregated into a singlerepresentative with a taste for variety:( ∫) σU j = x j (0) 1−µ × x j (ω) σ−1 σ−1 µσ dω (1)Ω jwhere x indicates the quantity consumed, ω is the particular variety, Ω j is the set of availablevarieties in country j, µ ∈ (0, 1) is the income share spent on the set of varieties, and σ > 1 isthe elasticity of substitution between varieties. Varieties are assumed to be imperfect substitutes3 Helpman, Melitz, and Rubinstein (2008) describe a similar model.4
for one another. Labor does not reduce utility. The representative consumer in different countriesfaces a different set of available goods, Ω j .Good 0 is produced by a constant returns to scale production function where one unit oflabor makes w j units of good 0, q j (0) = w j (0)l j (0). This good is traded competitively and freelythroughout the world.Besides production of good 0, in each country there are monopolistic competitors, each producingone particular variety ω. The measure of monopolistic competitors active in each countryis L j . This measure of active firms is exogenously given, but is proportional to the aggregate laborendowment N j . No two potential competitors anywhere in the world produce the same good ω.Therefore knowing the variety ω pins down the country of production of ω.Labor is perfectlymobile across varieties and good 0 within each country.Monopolistic competitors differ in the goods they produce as well as their productivity, φ.Across and within countries, active firms know their permanent productivity φ(ω), which is therealization of a random variable Φ drawn from a Pareto distribution with support [1, ∞) andparameter γ:Pr(Φ ≤ u) = H(u) = 1 − u −γ . (2)Let γ > 0. The parameter γ indicates the heterogeneity of productivity: larger γ indicatesfirms are more similar since the mass of firms is more tightly packed. The Pareto distribution is astandard modeling choice because of its analytic simplicity.Production by firm ω for sale in country j depends on the productivity of firm ω and the laborit uses to sell to j: q j (φ(ω)) = φ(ω)l j (φ(ω)).Any of the varieties may be traded. There is a variable cost to trade given by τ ij . If τ ij unitsof a variety are shipped from i to j then one unit arrives (Samuelson 1954). Assume τ jj = 1 forall j, τ ij > 1 for all i ≠ j, and the triangle inequality holds. The transportation cost need not besymmetric so it is possible τ ij ≠ τ ji . There is also a fixed cost for firms in i who export to j givenby f ij > 0 for i ≠ j and f jj = 0. Similar to τ ij , assume the triangle inequality holds for f ij andsymmetry need not hold. The fixed cost is paid in units of labor by the exporting firm. Thesetrade costs are identical for all firms in the same country; they do not depend on the productivity5
Page 3 and 4: 1 IntroductionDuring the week of Oc
Page 5: to increase sales further.From the
Page 9 and 10: hold.• Good 0: q ∗ j (0) > 0, p
Page 11 and 12: If there are zero trade missions th
Page 13 and 14: diversionary impact of missions. Le
Page 15 and 16: Figure 1. Economics of the theorem.
Page 17 and 18: Figure 2. Country RGDP and state tr
Page 19 and 20: Figure 3. State total value of manu
Page 21 and 22: data. The regression equation corre
Page 23 and 24: Table 1.OLS Estimates of Export Ela
Page 25 and 26: 5 ConclusionU.S. state governors fr
Page 27 and 28: International Monetary Fund 2006. W
Page 29 and 30: Proof. From Chaney, aggregate state
Page 31: Government. Finally there must be a

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