Economics Seminar（2014-11）

Topic:The Dalai Lama Effect Revisited: How Do Importers Respond to Political Tensions?

Speaker:Faqin Lin

Affiliation:Central University of Finance and Economics

Time:Wednesday, 7 May. 13:00-14:30pm

Location:Room216, Guanghua Building 2

Abstract：

In their seminal paper, Fuchs and Klann [Fuchs, A., Klann, N.-H., 2013. Paying a visit: The Dalai Lama effect on international trade. Journal of International Economics 91 (1), 164–177] document that countries officially receiving the Dalai Lama are punished through a reduction of their exports to China over 2002-2008, notably for machinery and transport equipment products, and such “Dalai-Lama effect” is most significant at the highest political level, and disappears in the second year after a meeting took place. As a complement, this paper investigates how Chinese importers respond to this “Dalai-Lama” effect using China customs data covering machinery and transport equipment sectors which includes the monthly transactions of all Chinese importers from 203 partner countries between 2000 January to 2006 December. Our empirical analysis produces several supplementary findings: (1) the substantial import-dampening effect at the firm level operates promptly at the extensive margin (i.e., a decrease in the number of importers) for half a year (a quarter before and a quarter after visit); (2) at the intensive margin (i.e., a decrease in the export volume per exporter), the contraction takes place sometime later than extensive margin, lasting for four months starting at third month after visit and then disappears; (3) the findings above suggest that the Dalai-Lama effect works via increasing fixed cost of trade first and variable cost of cost next, (4) such effect is only observed in state-owned firms and foreign invested firms but not in private firms; (5) we find this effect is significant in ordinary traders and direct importers, but not in processing traders and pure traders. Furthermore, this “Dalai-Lama” effect is still robust to Fuchs and Klann (2013) after addressing the endogeneity and investigating the heterogeneous effect for different political level receiving the Dalai Lama.

Your participation is warmly welcomed!