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The Costs of Babylon – Linguistic Distance in Applied Economics

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  • Ingo E. Isphording

    ()

  • Sebastian Otten

Abstract

Linguistic distance, i.e. the dissimilarity between languages, is an important factor influencing international economic transactions such as migration or international trade flows by imposing hurdles for second language acquisition and increasing transaction costs. To measure these costs, we suggest to use a new measure of linguistic distance. The Levenshtein distance is an easily computed and transparent approach of including linguistic distance into econometric applications. We show its merits in two different applications. First, the effect of linguistic distance in the language acquisition of immigrants is analyzed using data from the 2000 U.S. Census, the German Socio-Economic Panel, and the National Immigrant Survey of Spain. Across countries, linguistic distance is negatively correlated with reported language skills of immigrants. Second, applying a gravity model to data on international trade flows covering 178 countries and 52 years, it is shown that linguistic distance has a strong negative influence on bilateral trade volumes.

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Bibliographic Info

Paper provided by Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen in its series Ruhr Economic Papers with number 0337.

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Length: 38 pages
Date of creation: May 2012
Date of revision:
Handle: RePEc:rwi:repape:0337

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Keywords: Linguistic distance; immigrants; language; transferability; human capital; international trade;

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References

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  1. repec:hal:journl:halshs-00641280 is not listed on IDEAS
  2. Gil S. Epstein & Ira N. Gang, 2010. "Migration and Culture," Working Papers 2010-17, Department of Economics, Bar-Ilan University.
  3. Chiswick, Barry R. & Miller, Paul W., 2004. "Linguistic Distance: A Quantitative Measure of the Distance Between English and Other Languages," IZA Discussion Papers 1246, Institute for the Study of Labor (IZA).
  4. Felbermayr, Gabriel J. & Toubal, Farid, 2010. "Cultural proximity and trade," European Economic Review, Elsevier, vol. 54(2), pages 279-293, February.
  5. Cristina Fernández & Ana Carolina Ortega Masagué, 2006. "Labor Market Assimilation of Immigrants in Spain: Employment at the Expense of Bad Job-Matches?," Working Papers 2006-21, FEDEA.
  6. 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.
  7. Adsera, Alicia & Pytlikova, Mariola, 2012. "The Role of Language in Shaping International Migration," IZA Discussion Papers 6333, Institute for the Study of Labor (IZA).
  8. Ingo E. Isphording & Sebastian Otten, 2011. "Linguistic Distance and the Language Fluency of Immigrants," Ruhr Economic Papers 0274, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  9. Ku, Hyejin & Zussman, Asaf, 2010. "Lingua franca: The role of English in international trade," Journal of Economic Behavior & Organization, Elsevier, vol. 75(2), pages 250-260, August.
  10. repec:hal:cesptp:halshs-00641280 is not listed on IDEAS
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Cited by:
  1. Jan Fidrmuc & Jarko Fidrmuc, 2014. "Foreign Languages and Trade," CESifo Working Paper Series 4670, CESifo Group Munich.
  2. Ingo Isphording, 2013. "Disadvantages of Linguistic Origin – Evidence from Immigrant Literacy Scores," Ruhr Economic Papers 0397, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  3. 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.
  4. Ingo E. Isphording & Sebastian Otten, 2011. "Linguistic Distance and the Language Fluency of Immigrants," Ruhr Economic Papers 0274, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  5. Antonio Di Paolo & Aysit Tansel, 2013. "Returns to Foreign Language Skills in a Developing Country: The Case of Turkey," Working Papers XREAP2013-07, Xarxa de Referència en Economia Aplicada (XREAP), revised Oct 2013.
  6. George J. Borjas, 2013. "The Slowdown in the Economic Assimilation of Immigrants: Aging and Cohort Effects Revisited Again," NBER Working Papers 19116, National Bureau of Economic Research, Inc.
  7. Alberto Alesina & Johann Harnoss & Hillel Rapoport, 2013. "Birthplace Diversity and Economic Prosperity," NBER Working Papers 18699, National Bureau of Economic Research, Inc.
  8. Chiswick, Barry R. & Miller, Paul W., 2014. "International Migration and the Economics of Language," IZA Discussion Papers 7880, Institute for the Study of Labor (IZA).

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