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International Trade, OECD Membership, and Religion

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  • Heejoon Kang
  • Michele Fratianni

Abstract

Transaction costs in trade gravity equation are proxied by the distance that separates two trading partners, under the assumption that the distance elasticity is the same across all trading partners. We show that distance elasticity, however, critically depends on whether trading partners are industrial countries (i.e., members of the OECD) or share same religion. These heterogeneities are both statistically and economically significant. For instance, expected trade flows are the largest when an OECD member trades with a non-member and both are non-religious. Expected trade flows fall as much as by 62.9% between two non-religious, non-OECD members. Expected bilateral trade drops by 48.1% when both countries in the pair are OECD members while one is Christian and the other is Islamic. Both religion and OECD membership significantly affect the typical transaction costs implied by the gravity equation. Copyright Springer Science + Business Media, LLC 2006

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  • Heejoon Kang & Michele Fratianni, 2006. "International Trade, OECD Membership, and Religion," Open Economies Review, Springer, vol. 17(4), pages 493-508, December.
    • Handle: RePEc:kap:openec:v:17:y:2006:i:4:p:493-508
    DOI: 10.1007/s11079-006-0361-y
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    1. Andrew Rose, 2005. "Which International Institutions Promote International Trade?," Review of International Economics, Wiley Blackwell, vol. 13(4), pages 682-698, September.
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    3. Douglas L. Campbell, 2010. "History, Culture, and Trade: A Dynamic Gravity Approach," EERI Research Paper Series EERI_RP_2010_26, Economics and Econometrics Research Institute (EERI), Brussels.
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    5. Farha Fatema & Mohammad Monirul Islam, 2020. "Driving Forces of Marine Fisheries and Seafood Export of Bangladesh: Augmented Gravity Model Approach," Asian Journal of Economic Modelling, Asian Economic and Social Society, vol. 8(2), pages 106-122, June.
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    7. Michele Fratianni & Francesco Marchionne, 2012. "Trade Costs and Economic Development," Economic Geography, Taylor & Francis Journals, vol. 88(2), pages 137-163, April.
    8. Balogh, Jeremiás Máté, 2016. "A földrajzi távolság, a kulturális hasonlóság és a szabadkereskedelem hatása a borkereskedelemre [Effects on the global wine trade of geographical distance, cultural and linguistic similarity, and ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(7), pages 858-881.
    9. Michele Fratianni & Francesco Marchionne, 2008. "Heterogeneity In Trade Costs," Economics Bulletin, AccessEcon, vol. 6(48), pages 1-14.
    10. Jeremiás Máté Balogh & Nuno Carlos Leitão, 2019. "A gravity approach of agricultural trade: The nexus of the EU and African, Caribbean and Pacific countries," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 65(11), pages 509-519.
    11. Jason Query & Jon C. Thompson, 2024. "Cultural Distance and International Trade," Open Economies Review, Springer, vol. 35(2), pages 283-300, April.
    12. Dang, Linjing & Zhao, Jingfeng, 2020. "Cultural risk and management strategy for Chinese enterprises' overseas investment," China Economic Review, Elsevier, vol. 61(C).
    13. Michele Fratianni & Francesco Marchionne, 2008. "Trade Costs and Provincial Heterogeneity in Italy," Working Papers 2008-03, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.

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