Working Paper: The Location of U.S. States Overseas Offices
Forty U.S. states operated an overseas office in 2002. Treating overseas offices as sales offices, I modify Holmes (2005) so offices facilitate exports by reducing the transaction cost of selling abroad. From theory, states operate an office if aggregate savings outweigh operating costs. Exploiting the differences in where states locate offices in the data, and controlling for aggregate characteristics, I estimate the impact of exports on the probability of an office existing. In addition, I find the average state savings from an office is 0.005%--0.009% of exports with a cut-off threshold of $1.0--1.4 billion.