Social cost benefit analysis of trade missions

For small open economies economic diplomacy is an important determinant of trade intensity, foreign direct investments and economic development, but comes at non-negligible costs. It is therefore important to evaluate the social welfare effects of economic diplomacy. The authors present a social cost benefit analysis of Dutch economic missions (head of state and ministerial levels) estimating its annual net present value at over €100 million. Central in their analysis is the welfare notion that extra exports only increase welfare to the extent that exporting companies are, on average, more productive than non-exporters. The economic benefits of economic missions are more difficult to quantify than the costs. Suggested avenues for further research include the quantification of the impact of missions on exports and foreign direct investment, and the productivity premium of exporters and the learning effect, especially for new exporters that require government support.