International Friends and Enemies
To what extent do nations’ economic interests influence their political behavior? To shed light on this question, we develop new theory-consistent measures of the sensitivity of country welfare to foreign productivity growth. We derive these measures from the class of international trade models with a constant trade elasticity. Using exogenous sources of variation from both China’s emergence into the global economy and reductions in the cost of air travel over time, we show that as a country becomes more economically dependent on a trade partner, it realigns politically towards that trade partner.
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