Online from: 1988
|Title:||Language and foreign trade|
|Journal:||European Economic Review, May 2008, Volume: 52 Issue: 4 pp.667-699 (33 pages)|
|Keywords:||Costs, International Trade, Language|
|Article type:||Research paper|
|Reference:||37AP289 (Permanent URL)|
Design/methodology/approach - Cites prior studies before defining the possible influences of language, based on direct communication (DC) and translation costs. Separates languages into open-circuit(OCC) and other DC languages, and takes 29 languages that are both DC and OCC in 157 'countries'. Relies on Frankel and Rose (2002) for non-language variables. Specifies a gravity model of the impact of language on trade between pairs of countries, with and without a common language, literacy and linguistic diversity.
Findings - Finds that DC is three times more effective at encouraging trade than indirect communication, and that the common language effect is double that reported in earlier studies. Shows that literacy has a positive effect on trade, and trade is boosted by domestic linguistic difficulties. Adds that English is only one of several European languages that give a trade advantage, and that network externalities of languages are not important.
Research limitations/implications - Proposes extending to include cultural and ethnic variables, language-related products, and to consider trends over time.
Originality/value - Presents evidence of the economic value of languages.