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Does Cultural Distance Hinder Trade In Goods? A Comparative Study Of Nine Oecd Member Nations, Roger White, Bedassa Tadesse
Does Cultural Distance Hinder Trade In Goods? A Comparative Study Of Nine Oecd Member Nations, Roger White, Bedassa Tadesse
Economics
We examine the effect of cultural distance, a proxy for the lack of a minimum reservoir of trust necessary to initiate and complete trade deals, on bilateral trade flows. Employing data for 67 countries that span the years 1996– 2001, we estimate a series of modified gravity specifications and find that cultural dissimilarity between nations has an economically significant and consistently negative effect on aggregate and disaggregated trade flows; however, estimated effects vary in magnitude and economic significance across measures of trade and our cohort of OECD reference countries. The consistently negative influence of cultural distance indicates that policymakers may …