IDEAS home Printed from https://ideas.repec.org/p/ces/ceswps/_4670.html
   My bibliography  Save this paper

Foreign Languages and Trade

Author

Listed:
  • 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.

Suggested Citation

  • Jan Fidrmuc & Jarko Fidrmuc, 2014. "Foreign Languages and Trade," CESifo Working Paper Series 4670, CESifo.
    • Handle: RePEc:ces:ceswps:_4670
    as

    Download full text from publisher

    File URL: https://www.ifo.de/DocDL/cesifo1_wp4670.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. 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.
    2. Joshua D. Angrist & Jörn-Steffen Pischke, 2010. "The Credibility Revolution in Empirical Economics: How Better Research Design Is Taking the Con out of Econometrics," Journal of Economic Perspectives, American Economic Association, vol. 24(2), pages 3-30, Spring.
    3. Barry R. Chiswick & Paul W. Miller, 2007. "Modeling Immigrants’ Language Skills," Research in Labor Economics, in: Barry R. Chiswick (ed.), Immigration, volume 27, pages 75-128, Emerald Publishing Ltd.
    4. Alesina, Alberto & Devleeschauwer, Arnaud & Easterly, William & Kurlat, Sergio & Wacziarg, Romain, 2003. "Fractionalization," Journal of Economic Growth, Springer, vol. 8(2), pages 155-194, June.
    5. Baldwin, Richard & Taglioni, Daria, 2006. "Gravity for Dummies and Dummies for Gravity Equations," CEPR Discussion Papers 5850, C.E.P.R. Discussion Papers.
    6. Peter H. Egger & Andrea Lassmann, 2015. "The Causal Impact of Common Native Language on International Trade: Evidence from a Spatial Regression Discontinuity Design," Economic Journal, Royal Economic Society, vol. 0(584), pages 699-745, May.
    7. Koenker, Roger & Xiao, Zhijie, 2006. "Quantile Autoregression," Journal of the American Statistical Association, American Statistical Association, vol. 101, pages 980-990, September.
    8. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," Journal of Economic Literature, American Economic Association, vol. 42(3), pages 691-751, September.
    9. Kenneth I. Wolpin & Mark R. Rosenzweig, 2000. "Natural "Natural Experiments" in Economics," Journal of Economic Literature, American Economic Association, vol. 38(4), pages 827-874, December.
    10. Paul W. Miller & Barry R. Chiswick, 2002. "Immigrant earnings: Language skills, linguistic concentrations and the business cycle," Journal of Population Economics, Springer;European Society for Population Economics, vol. 15(1), pages 31-57.
    11. Koenker, Roger W & Bassett, Gilbert, Jr, 1978. "Regression Quantiles," Econometrica, Econometric Society, vol. 46(1), pages 33-50, January.
    12. 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.
    13. Matthieu Bussière & Jarko Fidrmuc & Bernd Schnatz, 2005. "Trade Integration of Central and Eastern European Countries: Lessons from a Gravity Model," Working Papers 105, Oesterreichische Nationalbank (Austrian Central Bank).
    14. Felbermayr, Gabriel J. & Toubal, Farid, 2010. "Cultural proximity and trade," European Economic Review, Elsevier, vol. 54(2), pages 279-293, February.
    15. Jonathan Eaton & Samuel Kortum & Brent Neiman & John Romalis, 2016. "Trade and the Global Recession," American Economic Review, American Economic Association, vol. 106(11), pages 3401-3438, November.
    16. Baldwin, Richard E., 2006. "The euro's trade effects," Working Paper Series 594, European Central Bank.
    17. Laszlo Matyas, 1997. "Proper Econometric Specification of the Gravity Model," The World Economy, Wiley Blackwell, vol. 20(3), pages 363-368, May.
    18. McCallum, John, 1995. "National Borders Matter: Canada-U.S. Regional Trade Patterns," American Economic Review, American Economic Association, vol. 85(3), pages 615-623, June.
    19. Melitz, Jacques, 2008. "Language and foreign trade," European Economic Review, Elsevier, vol. 52(4), pages 667-699, May.
    20. Peter Egger, 2002. "An Econometric View on the Estimation of Gravity Models and the Calculation of Trade Potentials," The World Economy, Wiley Blackwell, vol. 25(2), pages 297-312, February.
    21. Koenker,Roger, 2005. "Quantile Regression," Cambridge Books, Cambridge University Press, number 9780521845731, June.
    22. Feenstra, Robert C, 2002. "Border Effects and the Gravity Equation: Consistent Methods for Estimation," Scottish Journal of Political Economy, Scottish Economic Society, vol. 49(5), pages 491-506, December.
    23. GINSBURGH, Victor & PRIETO-RODRIGUEZ, Juan, 2007. "Returns to foreign languages of native workers in the EU," CORE Discussion Papers 2007021, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    24. 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, August.
    25. 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, May.
    26. 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;International Monetary Fund, vol. 58(2), pages 214-253, December.
    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 544-556, December.
    28. James E. Rauch & Vitor Trindade, 2002. "Ethnic Chinese Networks In International Trade," The Review of Economics and Statistics, MIT Press, vol. 84(1), pages 116-130, February.
    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. Brindusa Anghel & Antonio Cabrales & Jesus M. Carro, 2016. "Evaluating A Bilingual Education Program In Spain: The Impact Beyond Foreign Language Learning," Economic Inquiry, Western Economic Association International, vol. 54(2), pages 1202-1223, April.
    2. Isphording, Ingo, 2013. "Returns to Local and Foreign Language Skills – Causal Evidence from Spain," Ruhr Economic Papers 398, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    3. 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.
    4. 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.
    5. Fidrmuc, Jarko & Senaj, Matus, 2012. "Human Capital, Consumption, and Housing Wealth in Transition," Annual Conference 2012 (Goettingen): New Approaches and Challenges for the Labor Market of the 21st Century 62058, Verein für Socialpolitik / German Economic Association.
    6. Nicolas Sauter, 2012. "Talking trade: language barriers in intra-Canadian commerce," Empirical Economics, Springer, vol. 42(1), pages 301-323, February.
    7. Ingo E. Isphording, 2013. "Returns to Foreign Language Skills of Immigrants in Spain," LABOUR, CEIS, vol. 27(4), pages 443-461, December.
    8. Donald Lien & Yaqin Wang, 2013. "An economic analysis of instructional language," Education Economics, Taylor & Francis Journals, vol. 21(4), pages 380-391, September.
    9. Peter Egger & Andrea Lassmann, 2014. "Cultural Integration and Export Variety Overlap Across Countries," CESifo Working Paper Series 4800, CESifo.
    10. repec:zbw:rwirep:0398 is not listed on IDEAS
    11. Paniagua, Jordi & Figueiredo, Erik & Sapena, Juan, 2015. "Quantile regression for the FDI gravity equation," Journal of Business Research, Elsevier, vol. 68(7), pages 1512-1518.
    12. 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.
    13. Brindusa Anghel & Antonio Cabrales & Jesus M. Carro, 2016. "Evaluating A Bilingual Education Program In Spain: The Impact Beyond Foreign Language Learning," Economic Inquiry, Western Economic Association International, vol. 54(2), pages 1202-1223, April.
    14. König, Jörg & Ohr, Renate, 2011. "Small but beautiful? Economic impacts of the size of nations in the European Union," Center for European, Governance and Economic Development Research Discussion Papers 128, University of Goettingen, Department of Economics.
    15. 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.
    16. repec:got:cegedp:128 is not listed on IDEAS

    More about this item

    Keywords

    gravity model; foreign trade; economics of languages; natural experiment; median regression; quantile regression;

    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

    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:ces:ceswps:_4670. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Klaus Wohlrabe). General contact details of provider: http://edirc.repec.org/data/cesifde.html .

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.