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Common Spoken Languages and International Trade

Author

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  • Peter H. Egger

    (ETH Zürich - Eidgenössische Technische Hochschule - Swiss Federal Institute of Technology [Zürich], CEPR - Center for Economic Policy Research)

  • Farid Toubal

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, ENS Cachan - École normale supérieure - Cachan)

Abstract

This chapter examines the role of common spoken languages in international trade using a structural gravity model. By distinguishing between native (CSNL) and acquired (CSAL) spoken languages, we analyze their impact on trade flows at both the extensive and intensive margins. We find that linguistic commonality reduces fixed and variable trade costs, facilitating communication, trust, and efficiency in trade relationships. These effects are particularly pronounced in the exchange of complex, differentiated goods. Methodologically, we address key challenges, including the endogeneity of language variables and the spatial clustering of linguistic diversity, using robust econometric techniques. Beyond trade flows, we simulate the welfare effects of increased linguistic commonality. Our findings indicate that investments in language education and policies promoting linguistic integration yield substantial welfare gains, benefiting both domestic and international markets. This chapter advances the understanding of language as a determinant of trade and welfare, offering micro-founded insights into how linguistic factors shape economic outcomes. By integrating comprehensive measures of linguistic commonality into a gravity framework, the chapter sheds light on the broader implications of linguistic diversity for global trade, economic policy, and welfare distribution.
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Suggested Citation

  • Peter H. Egger & Farid Toubal, 2016. "Common Spoken Languages and International Trade," Post-Print hal-01306658, HAL.
    • Handle: RePEc:hal:journl:hal-01306658
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    Cited by:

    1. Swetha Loganathan & Joshy Joseph Karakunnel & Vijay Victor, 2021. "India–European Union Trade Integration: An Analysis of Current and Future Trajectories," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 15(4), pages 484-504, November.
    2. Steven Yamarik & Mariya Mileva, 2023. "Cultural institutes: Networks and determinants," The World Economy, Wiley Blackwell, vol. 46(4), pages 1119-1143, April.
    3. Cheng, Hua & Hu, Cui & Li, Ben G., 2020. "Lexicographic biases in international trade," Journal of International Economics, Elsevier, vol. 126(C).
    4. Inna Čábelková & Luboš Smutka & Svitlana Rotterova & Olesya Zhytna & Vít Kluger & David Mareš, 2022. "The Sustainability of International Trade: The Impact of Ongoing Military Conflicts, Infrastructure, Common Language, and Economic Wellbeing in Post-Soviet Region," Sustainability, MDPI, vol. 14(17), pages 1-14, August.
    5. Messner, Wolfgang, 2024. "Distance is the spice, but not the whole enchilada: Country-pair psychic distance stimuli and country fixed effects in a deep learning implementation of the trade flow model," International Business Review, Elsevier, vol. 33(1).
    6. Dasgupta, Indraneel & Neogi, Ranajoy Guha, 2017. "Decolonization, Property Rights and Language Conflicts," IZA Discussion Papers 10998, Institute of Labor Economics (IZA).
    7. Anh Quang Phan, 2021. "From Print Texts to Online Gaming: The Cross-Cultural History of Wuxia Fictions in Vietnam," SAGE Open, , vol. 11(2), pages 21582440211, May.
    8. Vandenbussche, Hylke & Aw-Roberts, Bee Yan & Lee, Yi, 2019. "The Importance of Consumer Taste in Trade," CEPR Discussion Papers 13614, C.E.P.R. Discussion Papers.
    9. Herman, Peter R. & Oliver, Sarah, 2023. "Trade, policy, and economic development in the digital economy," Journal of Development Economics, Elsevier, vol. 164(C).

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