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Foreign Languages and Trade

Author Info

  • Jan Fidrmuc
  • Jarko Fidrmuc

Abstract

Cultural factors and especially common languages are well-known determinants of trade. By contrast, the knowledge of foreign languages was not explored in the literature so far. We combine traditional gravity models with data on fluency in the main languages used in EU and candidate countries. We show that widespread knowledge of languages is an important determinant for foreign trade, with English playing an especially important role. The robustness of our results is confirmed by a natural experiment of trade between Eastern and Western Europe.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2014/wp-cesifo-2014-02/cesifo1_wp4670.pdf
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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 4670.

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Date of creation: 2014
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Handle: RePEc:ces:ceswps:_4670
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Keywords: gravity model; foreign trade; economics of languages; natural experiment; median regression; quantile regression;

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Find related papers by JEL classification:
  • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
  • F15 - International Economics - - Trade - - - Economic Integration
  • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General
  • Z10 - Other Special Topics - - Cultural Economics - - - General

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  1. Victor A. Ginsburgh & Juan Prieto-Rodriguez, 2011. "Returns to Foreign Languages of Native Workers in the EU," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 64(3), pages 599-618, April.
  2. 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.
  3. Ingo Eduard Isphording & Sebastian Otten, 2013. "The Costs of Babylon—Linguistic Distance in Applied Economics," Review of International Economics, Wiley Blackwell, vol. 21(2), pages 354-369, 05.
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  5. Barry R. Chiswick & Paul W. Miller, 1999. "Immigrant Earnings: Language Skills, Linguistic Concentrations and the Business Cycle," University of Chicago - George G. Stigler Center for Study of Economy and State 152, Chicago - Center for Study of Economy and State.
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  7. Joshua D. Angrist & Jörn-Steffen Pischke, 2010. "The Credibility Revolution in Empirical Economics: How Better Research Design is Taking the Con out of Econometrics," Working Paper Series of the German Council for Social and Economic Data 142, German Council for Social and Economic Data (RatSWD).
  8. Alesina, Alberto, et al, 2003. " Fractionalization," Journal of Economic Growth, Springer, vol. 8(2), pages 155-94, June.
  9. Melitz, Jacques, 2008. "Language and foreign trade," European Economic Review, Elsevier, vol. 52(4), pages 667-699, May.
  10. Bussière, Matthieu & Fidrmuc, Jarko & Schnatz, Bernd, 2005. "Trade integration of Central and Eastern European countries: lessons from a gravity model," Working Paper Series 0545, European Central Bank.
  11. Felbermayr, Gabriel & Toubal, Farid, 2006. "Cultural proximity and trade," Tübinger Diskussionsbeiträge 305, University of Tübingen, School of Business and Economics.
  12. Jonathan Eaton & Sam Kortum & Brent Neiman & John Romalis, 2010. "Trade and the global recession," Working Paper Research 196, National Bank of Belgium.
  13. Chiswick, Barry R. & Miller, Paul W., 2007. "Modeling Immigrants' Language Skills," IZA Discussion Papers 2974, Institute for the Study of Labor (IZA).
  14. Gilles Grenier & Serge Nadeau, 2011. "English as the Lingua Franca and the Economic Value of Other Languages: the Case of the Language of Work of Immigrants and Non-immigrants in the Montreal Labour Market," Working Papers 1107E, University of Ottawa, Department of Economics.
  15. Matthieu Bussière & Jarko Fidrmuc & Bernd Schnatz, 2008. "EU Enlargement and Trade Integration: Lessons from a Gravity Model," Review of Development Economics, Wiley Blackwell, vol. 12(3), pages 562-576, 08.
  16. Andrei A Levchenko & Logan T Lewis & Linda L Tesar, 2010. "The Collapse of International Trade during the 2008–09 Crisis: In Search of the Smoking Gun," IMF Economic Review, Palgrave Macmillan, vol. 58(2), pages 214-253, December.
  17. McCallum, John, 1995. "National Borders Matter: Canada-U.S. Regional Trade Patterns," American Economic Review, American Economic Association, vol. 85(3), pages 615-23, June.
  18. Gabriel Felbermayr & Farid Toubal, 2010. "Cultural Proximity and Trade," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00641280, HAL.
  19. James E. Rauch & Vitor Trindade, 1999. "Ethnic Chinese Networks in International Trade," NBER Working Papers 7189, National Bureau of Economic Research, Inc.
  20. William K. Hutchinson, 2002. "Does Ease of Communication Increase Trade? Commonality of Language and Bilateral Trade," Vanderbilt University Department of Economics Working Papers 0217, Vanderbilt University Department of Economics.
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  26. Baldwin, Richard E., 2006. "The euro’s trade effects," Working Paper Series 0594, European Central Bank.
  27. 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 544-56, December.
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Cited by:

  1. Jarko Fidrmuc & Matus Senaj, 2012. "Human Capital, Consumption, and Housing Wealth in Transition," Working and Discussion Papers WP 2/2012, Research Department, National Bank of Slovakia.
  2. Brindusa Anghel & Antonio Cabrales & Jesus M. Carro, 2012. "Evaluating a bilingual education program in Spain: the impact beyond foreign language learning," Working Papers 2012/30, Institut d'Economia de Barcelona (IEB).
  3. Ingo Isphording, 2013. "Returns to Local and Foreign Language Skills – Causal Evidence from Spain," Ruhr Economic Papers 0398, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  4. Helble, Matthias & Ngiang, Boon-Loong, 2014. "From Global Factory to Global Mall: East Asia’s Changing Trade Composition," ADBI Working Papers 496, Asian Development Bank Institute.
  5. Nicolas Sauter, 2009. "Talking Trade: Language Barriers in Intra-Canadian Commerce," FIW Working Paper series 023, FIW.
  6. Daria Ciriaci & Alessandro Muscio, 2011. "University choice, research quality and graduates' employability: Evidence from Italian national survey data," Working Papers 48, AlmaLaurea Inter-University Consortium.
  7. 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.
  8. Peter Egger & Andrea Lassmann, 2014. "Cultural Integration and Export Variety Overlap Across Countries," CESifo Working Paper Series 4800, CESifo Group Munich.

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