Diplomacy and international trade: dynamic panel gravity models in the case of Greece

The empirical footprint of Commercial Diplomacy (CD) is examined on the basis of stimulating exports and investment, while relevant literature usually adopts the joint number of embassies and consular authorities as proxies of the intensity of CD. This paper contributes threefold to the empirical literature: first, we use as dependent variable – in addition to exports – a spatial transformation of the regular Balassa Index that reveals the comparative advantages by trade partner yielding two dynamic specifications of the gravity model of trade estimated with generalized method of moments. Second, we proxy the effect of CD holistically using authorized posts of diplomats that diplomatic representations of Greece comprise alongside alternative explanatories based on manually collated data. Third, the study distinguishes not only between embassies and consular authorities but also between general consulates and consulates, showing that the estimated trade-related associations vary across different institutional forms and measures of diplomatic intensity.