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International friends and enemies

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  • Benny Kleinman
  • Ernest Liu
  • Stephen J. Redding

Abstract

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.

Suggested Citation

  • Benny Kleinman & Ernest Liu & Stephen J. Redding, 2020. "International friends and enemies," CEP Discussion Papers dp1708, Centre for Economic Performance, LSE.
    • Handle: RePEc:cep:cepdps:dp1708
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    More about this item

    Keywords

    productivity growth; trade; welfare;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration
    • F50 - International Economics - - International Relations, National Security, and International Political Economy - - - General

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