Culture, tastes, and market integration: Testing the localized tastes hypothesis

Tomoya Mori and Jens Wrona

No 1158, Ruhr Economic Papers from RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen

Abstract: To test the localized tastes hypothesis, we use historical dialect similarity as an instrument to predict the persistent component of regional taste differences. Analyzing wholesale markets for fruits and vegetables in Japan, we find that predicted taste differences have a strong, statistically significant effect, explaining approximately 9% of the mean volatility in law-of-one-price deviations. Our findings are robust across extensive validity checks, which scrutinize and relax our exclusion restriction, distinguishing between various sources of endogeneity, and confirm our baseline results based on alternative instruments, which exploit exogenous differences in agro-climatic endowments.

Keywords: Market integration; tastes; culture; dialects (search for similar items in EconPapers)
JEL-codes: D12 F15 N75 Q11 R22 Z13 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:rwirep:319077

DOI: 10.4419/96973342

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