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Distance, Transaction Costs, and Preferences in European Trade

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  • Ari Kokko
  • Patrik Gustavsson Tingvall

Abstract

Beckerman (1956) and Linder (1961) have suggested that international trade is not determined by supply-side factors alone-perceptions about foreign countries and country preferences matter. We explore the relation between exports, cultural distance, and country preferences in Europe. The results show that several distance and preference-related variables, based on Hofstede's cultural dimensions, income gaps, and voting patterns in the Eurovision Song Contest, are significantly related to bilateral trade. We conclude that cultural distance and preferences influence trade through several channels, both indirectly through transaction costs and more directly, as countries seem to prefer some trade partners before others.

Suggested Citation

  • Ari Kokko & Patrik Gustavsson Tingvall, 2014. "Distance, Transaction Costs, and Preferences in European Trade," The International Trade Journal, Taylor & Francis Journals, vol. 28(2), pages 87-120, June.
  • Handle: RePEc:taf:uitjxx:v:28:y:2014:i:2:p:87-120
    DOI: 10.1080/08853908.2013.830941
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