Common Language and International Trade

Michael Rindler
Despite extensive research, there are still many open questions regarding the role of language and culture for international trade. Measurement of common language is not straightforward and endogeneity issues render it difficult to estimate a causal impact of language on trade. I address these problems by constructing new data sets on common language and using the most recent developments in the estimation methods of the gravity equation of trade. I find, inter alia, that fractional measures of
more » ... common language perform better than simple dummies, that language mainly impacts the extensive margin of trade, that linguistic proximity has a significant effect on contemporaneous trade costs and that the increase in English skills in Europe had a causal positive impact on trade and welfare.
doi:10.5283/epub.46242 fatcat:7k66olyu4nawreyqcdfmhhx2ry