Language and foreign trade

    Research output: Contribution to journalArticle

    165 Citations (Scopus)

    Abstract

    While language plays an important role in gravity models, there has been little attention to the channels through which a common language promotes bilateral trade. This work proposes separate series for a common language depending upon whether ease of communication facilitates trade through translation or the ability to communicate directly. The series related to direct communication is far more important in explaining bilateral trade, but the other series, based on translation, makes a distinct contribution as well. Either measure of a common language outperforms the measure in popular use, which is implicitly related to translation, and a combination of the two does far better. In addition, the paper examines the effect of two country-specific linguistic influences on trade: Literacy and linguistic diversity at home. Both of these influences promote foreign relative to domestic trade. Finally, the article studies the separate roles of English and network externalities. © 2007 Elsevier B.V. All rights reserved.

    Original languageEnglish
    Pages (from-to)667-699
    Number of pages33
    JournalEuropean Economic Review
    Volume52
    Issue number4
    DOIs
    Publication statusPublished - May 2008

    Keywords

    • Foreign trade
    • Gravity model
    • Language

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