Working Paper: NBER ID: w15981
Authors: Daniel Berger; William Easterly; Nathan Nunn; Shanker Satyanath
Abstract: We exploit the recent declassification of CIA documents and examine whether there is evidence of US power being used to influence countries' decisions regarding international trade. We measure US influence using a newly constructed annual panel of CIA interventions aimed at installing and supporting leaders during the Cold War. Our presumption is that the US had greater influence over foreign leaders that were installed and backed by the CIA. We show that following CIA interventions there was an increase in foreign-country imports from the US, but there was no similar increase in foreign-country exports to the US. Further, the increase in US exports was concentrated in industries in which the US had a comparative disadvantage in producing, not a comparative advantage. This is consistent with US influence being used to create a larger foreign market for American products. Our analysis is able to rule out decreased bilateral trade costs, changing political ideology, and an increased supply of US loans and grants as explanations for the increase in US exports to the intervened country. We provide evidence that the increase in US exports arose through direct purchases of US products by foreign governments.
Keywords: CIA interventions; international trade; political influence; Cold War
JEL Codes: F10; F5; F54; N70
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| CIA interventions (F53) | increase in imports from the U.S. to intervened countries (F14) |
| CIA interventions (F53) | increase in imports from the U.S. to autocratic regimes (P33) |
| CIA interventions (F53) | no significant increase in exports from intervened countries to the U.S. (F14) |
| increase in imports from the U.S. to intervened countries (F14) | trade diversion rather than trade creation (F12) |
| CIA interventions (F53) | increase in imports concentrated in industries where the U.S. had a comparative disadvantage (F14) |
| CIA interventions (F53) | direct government purchases of U.S. products (H56) |