Modeling cultural barriers in international trade

István Kónya

No 547, Boston College Working Papers in Economics from Boston College Department of Economics

Abstract: The paper presents a model that analyses the role of cultural differences in international trade. The decision to study foreign cultures and languages is incorporated into a simple trade model, which captures some basic properties of cultural and language barriers. First, cultural costs differ from physical ones in that they can be eliminated by learning. Second, learning a language has economies of scale, thus smaller countries tend to invest more into learning. Third, learning decisions within one country impose an externality on trading partners, since learning by one party makes communication easier also for the other one. This implies that learning decisions are in general inefficient, and the paper derives the connection between the equilibrium and optimal outcomes. Finally, because of the substitutability of learning among countries, a policy where a country discourages learning - "cultural protectionism" - can be rationalized. Under certain conditions, such a policy can improve global welfare, not just that of the protecting country.

Keywords: International trade; Trade Costs; Culture; Strategic Interactions (search for similar items in EconPapers)
JEL-codes: F12 F13 H2 (search for similar items in EconPapers)
Date: 2002-11-30
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Citations: View citations in EconPapers (6)

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Related works:
Journal Article: Modeling Cultural Barriers in International Trade (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:boc:bocoec:547

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