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Economic impacts of cultural institutes

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  • Lien, Donald
  • Lo, Melody

Abstract

Since familiarization in language and culture enhances trust and reduces transaction costs, we hypothesize that there are positive economic effects of cultural institutes on trade and FDI. Data for the (German) Goethe-Insitut are used for the study. Our analysis based on gravity models finds significant positive effects from the establishment of the Goethe-Insitut on both trade and FDI, with stronger effects on FDI than on trade. In addition, the effects on outward FDI, imports and inward FDI are stronger for non-advanced economies than for advanced economies. The results of our analysis for the British Council are similar.

Suggested Citation

  • Lien, Donald & Lo, Melody, 2017. "Economic impacts of cultural institutes," The Quarterly Review of Economics and Finance, Elsevier, vol. 64(C), pages 12-21.
  • Handle: RePEc:eee:quaeco:v:64:y:2017:i:c:p:12-21
    DOI: 10.1016/j.qref.2017.02.002
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    Cited by:

    1. Frank, Jonas, 2018. "The effect of culture on trade over time: New evidence from the GLOBE data set," Hohenheim Discussion Papers in Business, Economics and Social Sciences 18-2018, University of Hohenheim, Faculty of Business, Economics and Social Sciences.
    2. Raquel Tebaldi & Anne Esser & Anna Davies Davidsen, 2017. "Promoting child- and gender-sensitive outcomes in cash transfer programmes: a review of different strategies in programme administration," Policy Research Brief 61, International Policy Centre for Inclusive Growth.
    3. Donald Lien & Melody Lo & David Bojanic, 2019. "Asymmetric effects of cultural institutes on trade and foreign direct investment," The World Economy, Wiley Blackwell, vol. 42(5), pages 1520-1553, May.
    4. Firat Demir & Hyeonjin Im, 2020. "Effects of cultural institutes on bilateral trade and FDI flows: Cultural diplomacy or economic altruism?," The World Economy, Wiley Blackwell, vol. 43(9), pages 2463-2489, September.
    5. Laurent Didier, 2019. "Soft power and exporters behavior in international trade," Economics Bulletin, AccessEcon, vol. 39(4), pages 2595-2614.
    6. Shahriar, Saleh & Qian, Lu & Kea, Sokvibol, 2018. "China's economic integration with the Greater Mekong Sub-region: An empirical analysis by a panel dynamic gravity model," Economics Discussion Papers 2018-44, Kiel Institute for the World Economy (IfW).
    7. Omar Martin Fieles-Ahmad & Matthias Huber, 2021. "Learn German, Buy German? Language-learning opportunities abroad and exports," Jena Economic Research Papers 2021-008, Friedrich-Schiller-University Jena.
    8. Xie, Mengjun, 2021. "Increase in income and international promotion of language: Evidence from China," International Review of Economics & Finance, Elsevier, vol. 73(C), pages 275-289.

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