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Cultural distance as a determinant of bilateral trade flows: do immigrants counter the effect of cultural differences?

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  • Bedassa Tadesse
  • Roger White

Abstract

We introduce 'cultural distance' as a measure of the degree to which shared norms and values in one country differ from those in another country, and employ a modified gravity specification to examine whether such cultural differences affect the volume of trade flows. Employing data for US state-level exports to the 75 trading partners for which measures of cultural distance can be constructed, we find that greater cultural differences between the United States and a trading partner reduces state-level exports to that country. This result holds for aggregate exports, cultural and noncultural products exports as well, but with significantly different magnitudes. Immigrants are found to exert a pro-export effect that partially offsets the trade-inhibiting effects of cultural distance.

Suggested Citation

  • Bedassa Tadesse & Roger White, 2010. "Cultural distance as a determinant of bilateral trade flows: do immigrants counter the effect of cultural differences?," Applied Economics Letters, Taylor & Francis Journals, vol. 17(2), pages 147-152, January.
    • Handle: RePEc:taf:apeclt:v:17:y:2010:i:2:p:147-152
    DOI: 10.1080/13504850701719983
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    1. World Bank, 2006. "World Development Indicators 2006," World Bank Publications - Books, The World Bank Group, number 8151, December.
    2. Subhayu Bandyopadhyay & Cletus C. Coughlin & Howard J. Wall, 2008. "Ethnic Networks and US Exports," Review of International Economics, Wiley Blackwell, vol. 16(1), pages 199-213, February.
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