chapter  6
The influences of cultural distance on international trade
Pages 32

The existing literature on the topic of cultural distance and international trade is quite sparse. While there is a large literature examining the determinants of international trade flows, relatively few studies have considered the role of cultural distance as a potential determinant. Those studies that have allowed for a potential relationship between cultural distance and international trade flows have employed, as is done here, a number of measures to represent cultural differences. For example, Beugelsdijk et al. (2004) find that cultural distance, in addition to physical distance and institutional distance, is an important determinant of trade flows. Similarly, Boisso and Ferrantino (1997) employ an index measure of linguistic distance to represent cultural differences between trading partners. They find that greater cultural dissimilarity is negatively related to bilateral trade flows. Also focusing on language, Dunlevy (2006) uses a dummy variable to represent the commonality of official languages and, hence, to act as a proxy for cultural similarity. Considering the potential effect of cultural similarity on trade flows between the US and a number of immigrants’ home countries, Dunlevy reports greater trade volumes among country pairs where either English or Spanish is an official language. Finally, Otten (2013) examines international factor movements and finds that linguistic distance reduces international trade and investment flows.