IDEAS home Printed from https://ideas.repec.org/a/eee/soceco/v40y2011i6p732-735.html
   My bibliography  Save this article

International trade, foreign direct investment, and transaction costs in languages

Author

Listed:
  • Oh, Chang Hoon
  • Travis Selmier, W.
  • Lien, Donald

Abstract

We examine the roles of major trade languages in international trade and foreign direct investment (FDI) flows. Empirical results confirm that speaking a common language increases trade and FDI flows, yet the effect of major languages is more substantial in FDI than in international trade. In addition, we find evidence of a hierarchy in transaction costs of major languages in both trade and FDI.

Suggested Citation

  • Oh, Chang Hoon & Travis Selmier, W. & Lien, Donald, 2011. "International trade, foreign direct investment, and transaction costs in languages," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 40(6), pages 732-735.
    • Handle: RePEc:eee:soceco:v:40:y:2011:i:6:p:732-735
    DOI: 10.1016/j.socec.2011.08.003
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1053535711000916
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.socec.2011.08.003?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Michael A. Shields & Stephen Wheatley Price, 2002. "The English language fluency and occupational success of ethnic minority immigrant men living in English metropolitan areas," Journal of Population Economics, Springer;European Society for Population Economics, vol. 15(1), pages 137-160.
    2. Agnès Bénassy‐Quéré & Maylis Coupet & Thierry Mayer, 2007. "Institutional Determinants of Foreign Direct Investment," The World Economy, Wiley Blackwell, vol. 30(5), pages 764-782, May.
    3. Michele FRATIANNI, 2007. "The Gravity Equation in International Trade," Working Papers 307, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
    4. Hausman, Jerry A & Taylor, William E, 1981. "Panel Data and Unobservable Individual Effects," Econometrica, Econometric Society, vol. 49(6), pages 1377-1398, November.
    5. 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 246-288, April.
    6. Edward P. Lazear, 1999. "Culture and Language," Journal of Political Economy, University of Chicago Press, vol. 107(S6), pages 95-126, December.
    7. Subramanian, Arvind & Wei, Shang-Jin, 2007. "The WTO promotes trade, strongly but unevenly," Journal of International Economics, Elsevier, vol. 72(1), pages 151-175, May.
    8. Casale, Daniela & Posel, Dorrit, 2011. "English language proficiency and earnings in a developing country: The case of South Africa," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 40(4), pages 385-393, August.
    9. Ginsburgh, Victor & Ortuño-Ortín, Ignacio & Weber, Shlomo, 2007. "Learning foreign languages: Theoretical and empirical implications of the Selten and Pool model," Journal of Economic Behavior & Organization, Elsevier, vol. 64(3-4), pages 337-347.
    10. James E. Anderson & Eric van Wincoop, 2003. "Gravity with Gravitas: A Solution to the Border Puzzle," American Economic Review, American Economic Association, vol. 93(1), pages 170-192, March.
    11. Baldwin, Richard, 2007. "Trade Effects of the Euro: a Comparison of Estimators," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 22, pages 780-818.
    12. Petroulas, Pavlos, 2007. "The effect of the euro on foreign direct investment," European Economic Review, Elsevier, vol. 51(6), pages 1468-1491, August.
    13. Melitz, Jacques, 2008. "Language and foreign trade," European Economic Review, Elsevier, vol. 52(4), pages 667-699, May.
    14. Oh, Chang Hoon & Selmier II, W. Travis, 2008. "Expanding international trade beyond the RTA border: The case of ASEAN's economic diplomacy," Economics Letters, Elsevier, vol. 100(3), pages 385-387, September.
    15. Carrere, Celine, 2006. "Revisiting the effects of regional trade agreements on trade flows with proper specification of the gravity model," European Economic Review, Elsevier, vol. 50(2), pages 223-247, February.
    16. Lien, Donald & Oh, Chang Hoon & Selmier, W. Travis, 2012. "Confucius institute effects on China's trade and FDI: Isn't it delightful when folks afar study Hanyu?," International Review of Economics & Finance, Elsevier, vol. 21(1), pages 147-155.
    17. Dustmann, Christian, 1994. "Speaking Fluency, Writing Fluency and Earnings of Migrants," Journal of Population Economics, Springer;European Society for Population Economics, vol. 7(2), pages 133-156.
    18. William K. Hutchinson, 2002. "Does Ease of Communication Increase Trade? Commonality of Language and Bilateral Trade," Scottish Journal of Political Economy, Scottish Economic Society, vol. 49(5), pages 544-556, November.
    19. Hutchinson, William K, 2002. "Does Ease of Communication Increase Trade? Commonality of Language and Bilateral Trade," Scottish Journal of Political Economy, Scottish Economic Society, vol. 49(5), pages 544-556, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jacob Wood & Gohar Feroz Khan, 2015. "International trade negotiation analysis: network and semantic knowledge infrastructure," Scientometrics, Springer;Akadémiai Kiadó, vol. 105(1), pages 537-556, October.
    2. Akhtaruzzaman, Muhammad & Berg, Nathan & Lien, Donald, 2017. "Confucius Institutes and FDI flows from China to Africa," China Economic Review, Elsevier, vol. 44(C), pages 241-252.
    3. Antonio Di Paolo & Aysit Tansel, 2015. "Returns to Foreign Language Skills in a Developing Country: The Case of Turkey," Journal of Development Studies, Taylor & Francis Journals, vol. 51(4), pages 407-421, April.
    4. Steven Yamarik & Mariya Mileva, 2023. "Cultural institutes: Networks and determinants," The World Economy, Wiley Blackwell, vol. 46(4), pages 1119-1143, April.
    5. Brian Fabo & Miroslav Beblavý & Karolien Lenaerts, 2017. "The importance of foreign language skills in the labour markets of Central and Eastern Europe: assessment based on data from online job portals," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 44(3), pages 487-508, August.
    6. Navío-Marco, Julio & Solórzano-García, Marta & Matilla-García, Mariano & Urueña, Alberto, 2016. "Language as a key factor of long-term value creation in mergers and acquisitions in the telecommunications sector," Telecommunications Policy, Elsevier, vol. 40(10), pages 1052-1063.
    7. Konara, Palitha & Wei, Yingqi, 2019. "The complementarity of human capital and language capital in foreign direct investment," International Business Review, Elsevier, vol. 28(2), pages 391-404.
    8. Antonio Di Paolo & Aysit Tansel, 2015. "Returns to Foreign Language Skills in a Developing Country: The Case of Turkey," Journal of Development Studies, Taylor & Francis Journals, vol. 51(4), pages 407-421, April.
    9. Chensheng Xu & Feng Yao & Fan Zhang, 2015. "An Investigation of Confucius Institute’s Effects on China’s OFDI via Cultural Difference and Institutional Quality," Working Papers 15-45, Department of Economics, West Virginia University.
    10. Papageorgiadis, Nikolaos & McDonald, Frank & Wang, Chengang & Konara, Palitha, 2020. "The characteristics of intellectual property rights regimes: How formal and informal institutions affect outward FDI location," International Business Review, Elsevier, vol. 29(1).
    11. Santos, Maria & Brochado, Ana & Esperança, José, 2016. "Foreign direct investment patterns of global hotel chains," Journal of Business Research, Elsevier, vol. 69(11), pages 5235-5240.
    12. Mariya Neycheva, 2016. "Secondary versus higher education for growth: the case of three countries with different human capital’s structure and quality," Quality & Quantity: International Journal of Methodology, Springer, vol. 50(6), pages 2367-2393, November.
    13. Cuadros-Solas, Pedro Jesús & Salvador Muñoz, Carlos, 2022. "Disentangling the sources of sovereign rating adjustments: An examination of changes in rating policies following the GFC," Research in International Business and Finance, Elsevier, vol. 59(C).
    14. Fabo, B., 2017. "Towards an understanding of job matching using web data," Other publications TiSEM b8b877f2-ae6a-495f-b6cc-9, Tilburg University, School of Economics and Management.
    15. Amir Maghssudipour & Marco Bellandi & Annalisa Caloffi, 2023. "The role of language in international trade and the “made in Italy”," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 50(3), pages 677-702, September.
    16. Liang Chen & Wanli Li, 2022. "Language acquisition and regional innovation: Evidence from English proficiency in China," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(1), pages 178-191, January.
    17. Ly, Amadú & Esperança, José & Davcik, Nebojsa S., 2018. "What drives foreign direct investment: The role of language, geographical distance, information flows and technological similarity," Journal of Business Research, Elsevier, vol. 88(C), pages 111-122.
    18. Wei Feng & Yanrui Wu & Yue Fu, 2021. "Dialect Diversity and Foreign Direct Investment in China," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 29(2), pages 49-72, March.
    19. Mariya Neycheva, 2015. "Impact of Secondary and Tertiary Education on Economic Growth: a Co-integration Model for Bulgaria," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 4, pages 82-106.
    20. Lien, Donald & Oh, Chang Hoon, 2014. "Determinants of the Confucius Institute establishment," The Quarterly Review of Economics and Finance, Elsevier, vol. 54(3), pages 437-441.
    21. Shanshan Ouyang & Yanxi Li, 2019. "Confucius Institute and the Completion of Chinese Cross-Border Acquisitions," Sustainability, MDPI, vol. 11(18), pages 1-22, September.
    22. Konara, Palitha, 2020. "The role of language connectedness in reducing home bias in trade, investment, information, and people flows," Research in International Business and Finance, Elsevier, vol. 52(C).
    23. Liu, Min & Su, Cong & Wang, Fangfang & Huang, Liangxiong, 2020. "Chinese cross-border M&As in the “One Belt One Road” countries: The impact of Confucius Institutes," China Economic Review, Elsevier, vol. 61(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Lien, Donald & Oh, Chang Hoon & Selmier, W. Travis, 2012. "Confucius institute effects on China's trade and FDI: Isn't it delightful when folks afar study Hanyu?," International Review of Economics & Finance, Elsevier, vol. 21(1), pages 147-155.
    2. Selmier, W. Travis & Oh, Chang Hoon, 2012. "International business complexity and the internationalization of languages," Business Horizons, Elsevier, vol. 55(2), pages 189-200.
    3. Lien, Donald & Lo, Melody, 2017. "Economic impacts of cultural institutes," The Quarterly Review of Economics and Finance, Elsevier, vol. 64(C), pages 12-21.
    4. Antonio Di Paolo & Aysit Tansel, 2015. "Returns to Foreign Language Skills in a Developing Country: The Case of Turkey," Journal of Development Studies, Taylor & Francis Journals, vol. 51(4), pages 407-421, April.
    5. Antonio Di Paolo & Aysit Tansel, 2015. "Returns to Foreign Language Skills in a Developing Country: The Case of Turkey," Journal of Development Studies, Taylor & Francis Journals, vol. 51(4), pages 407-421, April.
    6. Michele Fratianni & Francesco Marchionne, 2011. "The Limits to Integration," Chapters, in: Miroslav N. Jovanović (ed.), International Handbook on the Economics of Integration, Volume I, chapter 9, Edward Elgar Publishing.
    7. Nicolas Sauter, 2012. "Talking trade: language barriers in intra-Canadian commerce," Empirical Economics, Springer, vol. 42(1), pages 301-323, February.
    8. 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.
    9. Melitz, Jacques, 2008. "Language and foreign trade," European Economic Review, Elsevier, vol. 52(4), pages 667-699, May.
    10. Anna Golovko & Hasan Sahin, 2021. "Analysis of international trade integration of Eurasian countries: gravity model approach," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 11(3), pages 519-548, September.
    11. Chang Hoon Oh & Michele Fratianni, 2010. "Do Additional Bilateral Investment Treaties Boost Foreign Direct Investments?," Working Papers 2010-04, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
    12. Osama Alhendi & József Tóth & Péter Lengyel & Péter Balogh, 2021. "Tolerance, Cultural Diversity and Economic Growth: Evidence from Dynamic Panel Data Analysis," Economies, MDPI, vol. 9(1), pages 1-16, February.
    13. Herrmann-Pillath, Carsten & Libman, Alexander & Yu, Xiaofan, 2014. "Economic integration in China: Politics and culture," Journal of Comparative Economics, Elsevier, vol. 42(2), pages 470-492.
    14. Cardamone, Paola, 2007. "A Survey of the Assessments of the Effectiveness of Preferential Trade Agreements using Gravity Models," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 60(4), pages 421-473.
    15. A Salim, Ruhu & Mahfuz Kabir, Mohammad, 2011. "Does More Trade Potential Remain in Arab States of the Gulf ?," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 26, pages 217-243.
    16. Budría, Santiago & Swedberg, Pablo, 2014. "The Impact of Multilingualism on Spanish Language Acquisition among Immigrants in Spain," IZA Discussion Papers 8748, Institute of Labor Economics (IZA).
    17. Aoki, Yu & Santiago, Lualhati, 2018. "Deprivation, Segregation, and Socioeconomic Class of UK Immigrants: Does English Proficiency Matter?," IZA Discussion Papers 11368, Institute of Labor Economics (IZA).
    18. Andrew Henley & Rhian Eleri Jones, 2005. "Earnings And Linguistic Proficiency In A Bilingual Economy," Manchester School, University of Manchester, vol. 73(3), pages 300-320, June.
    19. Jacek Liwiński, 2019. "The wage premium from foreign language skills," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 46(4), pages 691-711, November.
    20. Chensheng Xu & Feng Yao & Fan Zhang, 2015. "An Investigation of Confucius Institute’s Effects on China’s OFDI via Cultural Difference and Institutional Quality," Working Papers 15-45, Department of Economics, West Virginia University.

    More about this item

    Keywords

    Language; Gravity equation; International trade; Foreign direct investment; Transaction costs;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F20 - International Economics - - International Factor Movements and International Business - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:soceco:v:40:y:2011:i:6:p:732-735. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/620175 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.