IDEAS home Printed from https://ideas.repec.org/p/oxf/wpaper/718.html
   My bibliography  Save this paper

A Dissection of Trading Capital: Cultural persistence of trade in the aftermath of the fall of the Iron Curtain

Author

Listed:
  • Ferdinand Rauch
  • Matthias Beestermoller

Abstract

We show that the countries of the former Austro-Hungarian monarchy trade significantly more with one another in the aftermath of the collapse of the Iron Curtain than predicted by a standard gravity model. This trade surplus declines linearly and monotonically over time. We argue that these findings suggest that decaying cultural forces explain a significant part of trading capital. We document the rate of decay of these cultural forces.

Suggested Citation

  • Ferdinand Rauch & Matthias Beestermoller, 2014. "A Dissection of Trading Capital: Cultural persistence of trade in the aftermath of the fall of the Iron Curtain," Economics Series Working Papers 718, University of Oxford, Department of Economics.
    • Handle: RePEc:oxf:wpaper:718
    as

    Download full text from publisher

    File URL: https://ora.ox.ac.uk/objects/uuid:9c98b7e5-0578-4903-ba71-458a592f672a
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Ferdinand Rauch, 2014. "A Fable of Bees and Gravity," Economics Series Working Papers 716, University of Oxford, Department of Economics.
    2. Melitz, Jacques & Toubal, Farid, 2014. "Native language, spoken language, translation and trade," Journal of International Economics, Elsevier, vol. 93(2), pages 351-363.
    3. Gabriel J Felbermayr & Wilhelm Kohler, 2014. "Exploring the Intensive and Extensive Margins of World Trade," World Scientific Book Chapters, in: European Economic Integration, WTO Membership, Immigration and Offshoring, chapter 4, pages 115-148, World Scientific Publishing Co. Pte. Ltd..
    4. 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.
    5. Disdier, Anne-Celia & Mayer, Thierry, 2007. "Je t'aime, moi non plus: Bilateral opinions and international trade," European Journal of Political Economy, Elsevier, vol. 23(4), pages 1140-1159, December.
    6. repec:hal:spmain:info:hdl:2441/10183 is not listed on IDEAS
    7. Dalia Marin, 2006. "A New International Division of Labor in Europe: Outsourcing and Offshoring to Eastern Europe," Journal of the European Economic Association, MIT Press, vol. 4(2-3), pages 612-622, 04-05.
    8. repec:hal:wpspec:info:hdl:2441/eu4vqp9ompqllr09iatsh0to2 is not listed on IDEAS
    9. Djankov, Simeon & Freund, Caroline, 2002. "Trade Flows in the Former Soviet Union, 1987 to 1996," Journal of Comparative Economics, Elsevier, vol. 30(1), pages 76-90, March.
    10. Stephen J. Redding & Daniel M. Sturm, 2008. "The Costs of Remoteness: Evidence from German Division and Reunification," American Economic Review, American Economic Association, vol. 98(5), pages 1766-1797, December.
    11. Guy Michaels & Xiaojia Zhi, 2010. "Freedom Fries," American Economic Journal: Applied Economics, American Economic Association, vol. 2(3), pages 256-281, July.
    12. Head, Keith & Mayer, Thierry, 2014. "Gravity Equations: Workhorse,Toolkit, and Cookbook," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 131-195, Elsevier.
    13. James E. Anderson & Yoto V. Yotov, 2012. "Gold Standard Gravity," Boston College Working Papers in Economics 795, Boston College Department of Economics.
    14. Robert C. Feenstra & Robert E. Lipsey & Haiyan Deng & Alyson C. Ma & Hengyong Mo, 2005. "World Trade Flows: 1962-2000," NBER Working Papers 11040, National Bureau of Economic Research, Inc.
    15. Yann Algan & Pierre Cahuc, 2010. "Inherited Trust and Growth," American Economic Review, American Economic Association, vol. 100(5), pages 2060-2092, December.
    16. repec:hal:wpspec:info:hdl:2441/10183 is not listed on IDEAS
    17. Nico Voigtländer & Hans-Joachim Voth, 2012. "Persecution Perpetuated: The Medieval Origins of Anti-Semitic Violence in Nazi Germany," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 127(3), pages 1339-1392.
    18. Melissa Dell & Benjamin F. Jones & Benjamin A. Olken, 2014. "What Do We Learn from the Weather? The New Climate-Economy Literature," Journal of Economic Literature, American Economic Association, vol. 52(3), pages 740-798, September.
    19. Felbermayr, Gabriel J. & Toubal, Farid, 2010. "Cultural proximity and trade," European Economic Review, Elsevier, vol. 54(2), pages 279-293, February.
    20. repec:spo:wpecon:info:hdl:2441/eu4vqp9ompqllr09iatsh0to2 is not listed on IDEAS
    21. Erzo F. P. Luttmer & Monica Singhal, 2011. "Culture, Context, and the Taste for Redistribution," American Economic Journal: Economic Policy, American Economic Association, vol. 3(1), pages 157-179, February.
    22. Egger, Peter, 2000. "A note on the proper econometric specification of the gravity equation," Economics Letters, Elsevier, vol. 66(1), pages 25-31, January.
    23. Head, Keith & Mayer, Thierry & Ries, John, 2010. "The erosion of colonial trade linkages after independence," Journal of International Economics, Elsevier, vol. 81(1), pages 1-14, May.
    24. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2009. "Cultural Biases in Economic Exchange?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 124(3), pages 1095-1131.
    25. Alberto Alesina & Paola Giuliano & Nathan Nunn, 2013. "On the Origins of Gender Roles: Women and the Plough," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 128(2), pages 469-530.
    26. Max-Stephan Schulze & Nikolaus Wolf, 2009. "On the origins of border effects: insights from the Habsburg Empire," Journal of Economic Geography, Oxford University Press, vol. 9(1), pages 117-136, January.
    27. Alfred Lameli & Volker Nitsch & Jens Südekum & Nikolaus Wolf, 2015. "Same Same But Different: Dialects and Trade," German Economic Review, Verein für Socialpolitik, vol. 16(3), pages 290-306, August.
    28. Mayer, Thierry & Zignago, Soledad, 2006. "Notes on CEPII’s distances measures," MPRA Paper 26469, University Library of Munich, Germany.
    29. Max‐Stephan Schulze & Nikolaus Wolf, 2012. "Economic nationalism and economic integration: the Austro‐Hungarian Empire in the late nineteenth century," Economic History Review, Economic History Society, vol. 65(2), pages 652-673, May.
    30. J. M. C. Santos Silva & Silvana Tenreyro, 2006. "The Log of Gravity," The Review of Economics and Statistics, MIT Press, vol. 88(4), pages 641-658, November.
    31. 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.
    32. Nathan Nunn & Leonard Wantchekon, 2011. "The Slave Trade and the Origins of Mistrust in Africa," American Economic Review, American Economic Association, vol. 101(7), pages 3221-3252, December.
    33. Georges Ménil & Mathilde Maurel, 1994. "Breaking up a customs union: The case of the Austro-Hungarian Empire in 1919," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 130(3), pages 553-575, September.
    34. Sascha O. Becker & Katrin Boeckh & Christa Hainz & Ludger Woessmann, 2016. "The Empire Is Dead, Long Live the Empire! Long‐Run Persistence of Trust and Corruption in the Bureaucracy," Economic Journal, Royal Economic Society, vol. 126(590), pages 40-74, February.
    35. repec:spo:wpmain:info:hdl:2441/432sbils8u9t7qa99cii5psht1 is not listed on IDEAS
    36. repec:spo:wpmain:info:hdl:2441/10183 is not listed on IDEAS
    37. Daron Acemoglu & Simon Johnson & James A. Robinson, 2002. "Reversal of Fortune: Geography and Institutions in the Making of the Modern World Income Distribution," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(4), pages 1231-1294.
    38. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-1426, November.
    39. repec:ags:aaea07:417 is not listed on IDEAS
    40. Marin, Dalia, 2006. "A New International Division of Labour in Europe," CEPR Discussion Papers 5447, C.E.P.R. Discussion Papers.
    41. repec:hal:spmain:info:hdl:2441/eu4vqp9ompqllr09iatsh0to2 is not listed on IDEAS
    42. Thom, Rodney & Walsh, Brendan, 2002. "The effect of a currency union on trade: Lessons from the Irish experience," European Economic Review, Elsevier, vol. 46(6), pages 1111-1123, June.
    43. C. Umana Dajud, 2013. "Political Proximity and International Trade," Economics and Politics, Wiley Blackwell, vol. 25(3), pages 283-312, November.
    44. repec:hal:wpspec:info:hdl:2441/dambferfb7dfprc9m01g1j1k2 is not listed on IDEAS
    45. repec:spo:wpmain:info:hdl:2441/dambferfb7dfprc9m01g1j1k2 is not listed on IDEAS
    46. repec:edn:sirdps:417 is not listed on IDEAS
    47. repec:spo:wpecon:info:hdl:2441/10183 is not listed on IDEAS
    48. Durante, Ruben, 2009. "Risk, Cooperation and the Economic Origins of Social Trust: an Empirical Investigation," MPRA Paper 25887, University Library of Munich, Germany.
    49. repec:ags:aaea07:381 is not listed on IDEAS
    50. repec:spo:wpecon:info:hdl:2441/dambferfb7dfprc9m01g1j1k2 is not listed on IDEAS
    51. repec:spo:wpmain:info:hdl:2441/eu4vqp9ompqllr09iatsh0to2 is not listed on IDEAS
    52. repec:hal:spmain:info:hdl:2441/432sbils8u9t7qa99cii5psht1 is not listed on IDEAS
    53. repec:hal:spmain:info:hdl:2441/dambferfb7dfprc9m01g1j1k2 is not listed on IDEAS
    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. Marta Santamaría & Jaume Ventura & Uğur Yeşilbayraktar, 2020. "Borders within Europe," Economics Working Papers 1763, Department of Economics and Business, Universitat Pompeu Fabra, revised Feb 2024.
    2. Anna Maria Koukal, 2017. "How Vatican II influenced female enfranchisement: A story of rapid cultural change," CREMA Working Paper Series 2017-07, Center for Research in Economics, Management and the Arts (CREMA).
    3. Ugur Yesilbayraktar & Marta Santamaría & Jaume Ventura, 2021. "Borders within Europe," Working Papers 1229, Barcelona School of Economics.
    4. Polugodina, Maria & Grigoriadis, Theocharis N., 2024. "East Prussia 2.0: Persistent regions, rising nations," European Economic Review, Elsevier, vol. 167(C).
    5. Gunes Gokmen & Wessel N. Vermeulen & Pierre-Louis Vézina, 2020. "The imperial roots of global trade," Journal of Economic Growth, Springer, vol. 25(1), pages 87-145, March.
    6. Christoph Hammer & Aurélien Fichet de Clairfontaine, 2016. "Trade Costs and Income in European Regions," Department of Economics Working Papers wuwp220, Vienna University of Economics and Business, Department of Economics.
    7. Ventura, Jaume & Santamaria, Marta & YeÅŸilbayraktar, UÄŸur, 2021. "Borders within Europe," CEPR Discussion Papers 15633, C.E.P.R. Discussion Papers.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Beestermöller, Matthias & Rauch, Ferdinand, 2018. "A Dissection of Trading Capital: Trade in the Aftermath of the Fall of the Iron Curtain," The Journal of Economic History, Cambridge University Press, vol. 78(2), pages 358-393, June.
    2. Liu, Xianda & Hou, Wenxuan & Main, Brian G.M., 2022. "Anti-market sentiment and corporate social responsibility: Evidence from anti-Jewish pogroms," Journal of Corporate Finance, Elsevier, vol. 76(C).
    3. Melitz, Jacques & Toubal, Farid, 2014. "Native language, spoken language, translation and trade," Journal of International Economics, Elsevier, vol. 93(2), pages 351-363.
    4. Rindler, Michael, 2021. "Changing Language Skills and Trade in Europe," VfS Annual Conference 2021 (Virtual Conference): Climate Economics 242449, Verein für Socialpolitik / German Economic Association.
    5. Walker, Sarah, 2018. "Cultural barriers to market integration: Evidence from 19th century Austria," Journal of Comparative Economics, Elsevier, vol. 46(4), pages 1122-1145.
    6. Chilosi, David & Nikolic, Stefan, 2021. "Vanishing borders: ethnicity and trade costs at the origin of the Yugoslav market," SocArXiv fsmch, Center for Open Science.
    7. Ouyang, Difei & Yuan, Weidi, 2021. "The intergenerational transmission of historical conflicts: An application to China’s trade," Journal of Comparative Economics, Elsevier, vol. 49(3), pages 675-692.
    8. Fensore, Irene & Legge, Stefan & Schmid, Lukas, 2022. "Ancestry and international trade," Journal of Comparative Economics, Elsevier, vol. 50(1), pages 33-51.
    9. Lo Turco, Alessia & Maggioni, Daniela, 2018. "Effects of Islamic religiosity on bilateral trust in trade: The case of Turkish exports," Journal of Comparative Economics, Elsevier, vol. 46(4), pages 947-965.
    10. Volker Nitsch & Nikolaus Wolf, 2013. "Tear down this wall: on the persistence of borders in trade," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 46(1), pages 154-179, February.
    11. Anderson, James E. & Yotov, Yoto V., 2020. "Short run gravity," Journal of International Economics, Elsevier, vol. 126(C).
    12. Melissa Dell & Nathan Lane & Pablo Querubin, 2018. "The Historical State, Local Collective Action, and Economic Development in Vietnam," Econometrica, Econometric Society, vol. 86(6), pages 2083-2121, November.
    13. Leonardo M. Klüppel & Lamar Pierce & Jason A. Snyder, 2018. "Perspective—The Deep Historical Roots of Organization and Strategy: Traumatic Shocks, Culture, and Institutions," Organization Science, INFORMS, vol. 29(4), pages 702-721, August.
    14. Anderson, James E. & Borchert, Ingo & Mattoo, Aaditya & Yotov, Yoto V., 2018. "Dark costs, missing data: Shedding some light on services trade," European Economic Review, Elsevier, vol. 105(C), pages 193-214.
    15. 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.
    16. Visser, Robin, 2019. "The effect of the internet on the margins of trade," Information Economics and Policy, Elsevier, vol. 46(C), pages 41-54.
    17. Olivier BARGAIN & Jean-Marie CARDEBAT & Raphaël CHIAPPINI, 2020. "Trade Uncorked: Genetic Resistance and Quality Heterogeneity in Wine Exports," Bordeaux Economics Working Papers 2020-18, Bordeaux School of Economics (BSE).
    18. Nunn, Nathan, 2014. "Historical Development," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 2, chapter 7, pages 347-402, Elsevier.
    19. repec:osf:socarx:fsmch_v1 is not listed on IDEAS
    20. Fuchs-Schündeln, N. & Hassan, T.A., 2016. "Natural Experiments in Macroeconomics," Handbook of Macroeconomics, in: J. B. Taylor & Harald Uhlig (ed.), Handbook of Macroeconomics, edition 1, volume 2, chapter 0, pages 923-1012, Elsevier.
    21. Alex Korff & Nico Steffen, 2022. "Economic preferences and trade outcomes," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 158(1), pages 253-304, February.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration
    • N33 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy - - - Europe: Pre-1913
    • N34 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy - - - Europe: 1913-
    • N94 - Economic History - - Regional and Urban History - - - Europe: 1913-

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:oxf:wpaper:718. See general information about how to correct material in RePEc.

    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 bibliographic 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Anne Pouliquen The email address of this maintainer does not seem to be valid anymore. Please ask Anne Pouliquen to update the entry or send us the correct address (email available below). General contact details of provider: https://edirc.repec.org/data/sfeixuk.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.