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International trade, foreign direct investment, and transaction costs in languages

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  • Oh, Chang Hoon
  • Travis Selmier, W.
  • Lien, Donald

Abstract

We examine the roles of major trade languages in international trade and foreign direct investment (FDI) flows. Empirical results confirm that speaking a common language increases trade and FDI flows, yet the effect of major languages is more substantial in FDI than in international trade. In addition, we find evidence of a hierarchy in transaction costs of major languages in both trade and FDI.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics).

Volume (Year): 40 (2011)
Issue (Month): 6 ()
Pages: 732-735

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Handle: RePEc:eee:soceco:v:40:y:2011:i:6:p:732-735

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Web page: http://www.elsevier.com/locate/inca/620175

Related research

Keywords: Language; Gravity equation; International trade; Foreign direct investment; Transaction costs;

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References

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  1. Petroulas, Pavlos, 2007. "The effect of the euro on foreign direct investment," European Economic Review, Elsevier, vol. 51(6), pages 1468-1491, August.
  2. Michael A. Shields & Stephen Wheatley Price, 2002. "The English language fluency and occupational success of ethnic minority immigrant men living in English metropolitan areas," Journal of Population Economics, Springer, vol. 15(1), pages 137-160.
  3. Edward P. Lazear, 1995. "Culture and Language," NBER Working Papers 5249, National Bureau of Economic Research, Inc.
  4. Oh, Chang Hoon & Selmier II, W. Travis, 2008. "Expanding international trade beyond the RTA border: The case of ASEAN's economic diplomacy," Economics Letters, Elsevier, vol. 100(3), pages 385-387, September.
  5. Hausman, Jerry A. & Taylor, William E., 1981. "Panel data and unobservable individual effects," Journal of Econometrics, Elsevier, vol. 16(1), pages 155-155, May.
  6. Mélitz, Jacques, 2002. "Language and Foreign Trade," CEPR Discussion Papers 3590, C.E.P.R. Discussion Papers.
  7. Agnès Bénassy-Quéré & Maylis Coupet & Thierry Mayer, 2007. "Institutional Determinants of Foreign Direct Investment," The World Economy, Wiley Blackwell, vol. 30(5), pages 764-782, 05.
  8. Chiswick, Barry R & Miller, Paul W, 1995. "The Endogeneity between Language and Earnings: International Analyses," Journal of Labor Economics, University of Chicago Press, vol. 13(2), pages 246-88, April.
  9. Subramanian, Arvind & Wei, Shang-Jin, 2007. "The WTO promotes trade, strongly but unevenly," Journal of International Economics, Elsevier, vol. 72(1), pages 151-175, May.
  10. Ginsburgh, Victor & Ortuño-Ortín, Ignacio & Weber, Shlomo, 2007. "Learning foreign languages: Theoretical and empirical implications of the Selten and Pool model," Journal of Economic Behavior & Organization, Elsevier, vol. 64(3-4), pages 337-347.
  11. Baldwin, Richard, 2007. "Trade Effects of the Euro: a Comparison of Estimators," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 22, pages 780-818.
  12. Casale, Daniela & Posel, Dorrit, 2011. "English language proficiency and earnings in a developing country: The case of South Africa," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 40(4), pages 385-393, August.
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Cited by:
  1. repec:aqr:wpaper:201311 is not listed on IDEAS
  2. Antonio Di Paolo & Aysit Tansel, 2013. "“Returns to Foreign Language Skills in a Developing Country: The Case of Turkey”," IREA Working Papers 201319, University of Barcelona, Research Institute of Applied Economics, revised Nov 2013.

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