Economic Clash? The Role of Cultural Cleavages in Bilateral Trade Relations

Using a theory based gravity equation, I first show that cultural dissimilarity (similarity) negatively (positively) affects bilateral imports of countries. More importantly, I examine Huntington's the Clash of Civilizations hypothesis and provide evidence that the impact of cultural heterogeneity on trade flows is far more accentuated in the post-Cold War period than during the Cold War, a result that con firms Huntington's thesis from an economic standpoint.estimating a theory based gravity model of international tradeUsing a theory based gravity equation, I first show that cultural dissimilarity (similarity) negatively (positively) affects bilateral imports of countries. More importantly, I examine Huntington's the Clash of Civilizations hypothesis and provide evidence that the impact of cultural heterogeneity on trade flows is far more accentuated in the post-Cold War period than during the Cold War, a result that con firms Huntington's thesis from an economic standpoint. In the post-Cold War period, two countries that belong to different civilizations have 41 percent lower mean imports than those of the same civilization, whereas this effect is insigni cant during the Cold War. Alternatively, in the post-Cold War epoch, the average bilateral imports of a country pair sharing the same majority religion, ethnicity and language are 76 percent higher than those that do not share the same heritages, whereas this effect is not signi cant in the Cold War era.