Cultural factors and especially common languages are well-known determinants of trade. By contrast, the knowledge of foreign languages was not explored in the literature so far. We combine traditional gravity models with data on fluency in the main languages used in EU and candidate countries. We show that widespread knowledge of languages is an important determinant for foreign trade, with English playing an especially important role. Other languages (French, German, and Russian) play an important role mainly in particular regions. Furthermore, we argue that the effect of foreign languages on trade may be non-linear. The robustness of our results is confirmed by quantile regressions.
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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number
7228.
Find related papers by JEL classification: C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data F15 - International Economics - - Trade - - - Economic Integration F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General Z10 - Other Special Topics - - Cultural Economics - - - General
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