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Abstract

Forty US states operated an overseas office in 2002. Treating overseas offices as sales offices, the model assumes 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, the paper estimates the impact of exports on the probability of an office existing. In addition, the average state savings from an office is 0.04–0.10% of exports, with a cut-off threshold of US$850 million.