Cultural Differences and Bilateral Trade: An Empirical Study Based on Industrial Data from OECD and BRIICS Countries

Zao Sun, Yangzi Li and Pang Paul Wang

Emerging Markets Finance and Trade, 2023, vol. 59, issue 9, 2787-2801

Abstract: This study extends the cross-sectional gravity function in the Eaton and Kortum model to a panel-data model based on 36 OECD and six BRIICS countries from 2010 to 2018 and introduce heterogeneous technology to measure the competitiveness of each country by interaction fixed effects. The results illustrate that the total cultural distance between countries significantly impedes bilateral trade, as it increases trade costs. The conclusions are robust with instrumental variables, alternative measurement of cultural differences, and extended time window estimation. And the effects present heterogeneity in sub-dimensions of cultural distance and sub-industries.

Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:mes:emfitr:v:59:y:2023:i:9:p:2787-2801

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DOI: 10.1080/1540496X.2023.2195536

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