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Foreign Languages and Trade

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  • Fidrmuc, Jan
  • Fidrmuc, Jarko

Abstract

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.

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Date of creation: Mar 2009
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Handle: RePEc:cpr:ceprdp:7228

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Keywords: European integration; foreign trade; Gravity models; language; quantile regression;

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References

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  1. Reuven Glick & Andrew K. Rose, 2001. "Does a Currency Union Affect Trade? The Time Series Evidence," NBER Working Papers 8396, National Bureau of Economic Research, Inc.
  2. Chiswick, Barry R. & Miller, Paul W., 2007. "Modeling Immigrants' Language Skills," IZA Discussion Papers 2974, Institute for the Study of Labor (IZA).
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  4. Koenker, Roger & Xiao, Zhijie, 2006. "Quantile Autoregression," Journal of the American Statistical Association, American Statistical Association, vol. 101, pages 980-990, September.
  5. Paul W. Miller & Barry R. Chiswick, 2002. "Immigrant earnings: Language skills, linguistic concentrations and the business cycle," Journal of Population Economics, Springer, vol. 15(1), pages 31-57.
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  7. Laszlo Matyas, 1997. "Proper Econometric Specification of the Gravity Model," The World Economy, Wiley Blackwell, vol. 20(3), pages 363-368, 05.
  8. Matthieu Bussière & Jarko Fidrmuc & Bernd Schnatz, 2005. "Trade integration of Central and Eastern European countries - lessons from a gravity model," Working Paper Series 545, European Central Bank.
  9. McCallum, John, 1995. "National Borders Matter: Canada-U.S. Regional Trade Patterns," American Economic Review, American Economic Association, vol. 85(3), pages 615-23, June.
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  11. Roger Koenker & Kevin F. Hallock, 2001. "Quantile Regression," Journal of Economic Perspectives, American Economic Association, vol. 15(4), pages 143-156, Fall.
  12. Feenstra, Robert C, 2002. "Border Effects and the Gravity Equation: Consistent Methods for Estimation," Scottish Journal of Political Economy, Scottish Economic Society, vol. 49(5), pages 491-506, December.
  13. GINSBURGH, Victor & PRIETO-RODRIGUEZ, Juan, 2007. "Returns to foreign languages of native workers in the EU," CORE Discussion Papers 2007021, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  14. Matthieu Bussière & Jarko Fidrmuc & Bernd Schnatz, 2008. "EU Enlargement and Trade Integration: Lessons from a Gravity Model," Review of Development Economics, Wiley Blackwell, vol. 12(3), pages 562-576, 08.
  15. James E. Rauch & Vitor Trindade, 1999. "Ethnic Chinese Networks in International Trade," NBER Working Papers 7189, National Bureau of Economic Research, Inc.
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Cited by:
  1. Ingo Isphording, 2013. "Returns to Local and Foreign Language Skills – Causal Evidence from Spain," Ruhr Economic Papers 0398, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  2. Jarko Fidrmuc & Matus Senaj, 2012. "Human Capital, Consumption, and Housing Wealth in Transition," Working and Discussion Papers WP 2/2012, Research Department, National Bank of Slovakia.
  3. Nicolas Sauter, 2012. "Talking trade: language barriers in intra-Canadian commerce," Empirical Economics, Springer, vol. 42(1), pages 301-323, February.
  4. Roberto Antonietti & Massimo Loi, 2011. "The demand for foreign languages in Italian manufacturing," Working Papers 48, AlmaLaurea Inter-University Consortium.
  5. Jörg König & Renate Ohr, 2011. "Small but Beautiful? Economic Impacts of the Size of Nations in the European Union," Center for European, Governance and Economic Development Research Discussion Papers 128, University of Goettingen, Department of Economics.

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