Common Spoken Languages and International Trade

  • Peter H. Egger
  • Farid Toubal

Abstract

International trade economists are used to controlling for common languages in most studies on the determinants of bilateral trade. The usual measure of common language is a binary variable based on one or several common official languages. The use of this measure lies mainly in the difficulty of quantifying common language use more thoroughly. However, it is not obvious that a common official language adequately reflects the broader impact of language commonality on trade, including language-related ethnic ties and trust and the mere ability to communicate. For this reason, the impact of a binary common official language variable on bilateral trade might mismeasure the role of common languages on bilateral trade at large. In a recent study, Melitz and Toubal (2014) provide an important step toward the understanding of the impact of common languages on bilateral trade based on data on 42 common native and spoken languages in 195 countries. They find that the joint impact of different aspects of common languages is at least twice as large as the one of a common official language. Their findings, moreover, suggest that common spoken languages are particularly important, and the ease of communication plays a substantial role in explaining the role of common languages for bilateral trade.

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  1. J. Anderson (1979) ‘A Theoretical Foundation for the Gravity Equation’, American Economic Review, 69, 106–116.Google Scholar
  2. J. Anderson and E. Van Wincoop (2003) ‘Gravity with Gravitas: A Solution to the Border Puzzle’, American Economic Review, 93, 170–192.CrossRefGoogle Scholar
  3. J. Anderson and E. Van Wincoop (2004) ‘Trade Costs’, Journal of Economic Literature, 42, 691–751.CrossRefGoogle Scholar
  4. P. Armington (1969) ‘A Theory of Demand for Products Distinguished by Place of Production’, IMF Staff Papers, 16, 159–178.CrossRefGoogle Scholar
  5. B. Baltagi, P. Egger and M. Pfaffermayr (2003) ‘A Generalized Design for Bilateral Trade Flow Models’, Economics Letters, 80, 391–397.CrossRefGoogle Scholar
  6. B. Baltagi, P. Egger and M. Pfaffermayr (forthcoming) ‘Panel Data Gravity Models of International Trade’, In B. Baltagi (ed.) The Oxford Handbook of Panel Data (Oxford: Oxford University Press).Google Scholar
  7. J. Bergstrand, P. Egger and M. Larch (2013) ‘Gravity Redux: Estimation of Gravity-Equation Coefficients, Elasticities of Substitution, and General Equilibrium Comparative Statics Under Asymmetric Bilateral Trade Costs’, Journal of International Economics, 89, 110–121.CrossRefGoogle Scholar
  8. J. Eaton and S. Kortum (2002) ‘Technology, Geography, and Trade’, Econometrica, 70, 1741–1779.CrossRefGoogle Scholar
  9. P. Egger, M. Larch, K. Staub and R. Winkelmann (2011) ‘The Trade Effects of Endogenous Preferential Trade Agreements’, American Economic Journal: Economic Policy, 3, 113–143.Google Scholar
  10. P. Egger and A. Lassmann (2013) ‘The Causal Impact of Common Native Language On International Trade: Evidence from a Spatial Regression Discontinuity Design’, CEPR Discussion Paper No. 9441.Google Scholar
  11. P. Egger and S. Nigai (2014) ‘Structural Gravity with Dummies Only’, CEPR Discussion Paper No. 10427.Google Scholar
  12. P. Egger and K. Staub (2015) ‘GLM Estimation of Trade Gravity Models with Fixed Effects’, Empirical Economics, forthcoming.Google Scholar
  13. P. Egger and F. Toubal (2014) ‘Consumer Welfare Gains from Speaking Common Languages’, Mimeo.Google Scholar
  14. G. Felbermayr, B. Jung and F. Toubal (2011) ‘Ethnic Network, Information and International Trade: Revisiting the Evidence’, Annales d’Économie et de Statistique, 97–98, 41–70.Google Scholar
  15. G. Felbermayr and F. Toubal (2010) ‘Cultural Proximity and Trade’, European Economic Review, 54, 279–293.CrossRefGoogle Scholar
  16. V. Ginsburgh, J. Melitz and F. Toubal (2014) ‘Foreign Language Learning: An Econometric Analysis’, CESifo Working Paper No. 4923.Google Scholar
  17. L. Guiso, P. Sapienza and L. Zingales (2009) ‘Cultural Biases Affect Economic Exchange’, The Quarterly Journal of Economics, 124, 1095–1131.CrossRefGoogle Scholar
  18. J. Hahn and J. Meinecke (2005) ‘Time Invariant Regressor in Nonlinear Panel Model with Fixed Effects’, Econometric Theory, 21, 455–469.CrossRefGoogle Scholar
  19. J. Hausman and W. Taylor (1981) ‘Panel Data and Unobservable Individual Effects’, Econometrica, 49, 1377–1398.CrossRefGoogle Scholar
  20. K. Head and T. Mayer (2015) ‘Gravity Equations: Workhorse, Toolkit, and Cookbook’, In E. Helpman, K. Rogoff and G. Gopinath (eds) Handbook of International Economics 4 (Amsterdam: Elsevier Science Publishers).Google Scholar
  21. E. Helpman, M. Melitz and Y. Rubinstein (2008) ‘Estimating Trade Flows: Trading Partners and Trading Volumes’, Quarterly Journal of Economics, 123, 441–487.CrossRefGoogle Scholar
  22. T. Mayer and G. Ottaviano (2007) ‘The Happy Few: The Internationalisation of European Firms: New Facts Based on Firm-Level Evidence’, Bruegel Blueprint Series, Vol. III.Google Scholar
  23. J. Melitz (2008) ‘Language and Foreign Trade’, European Economic Review, 52, 667–699.CrossRefGoogle Scholar
  24. J. Melitz and F. Toubal (2014) ‘Native Language, Spoken Language, Translation and Trade’, Journal of International Economics, 93, 351–363.CrossRefGoogle Scholar
  25. J. Rauch (1999) ‘Networks Versus Markets in International Trade’, Journal of International Economics, 48, 7–35.CrossRefGoogle Scholar
  26. J. Santos Silva and S. Tenreyro (2006) ‘The Log of Gravity’, Review of Economics and Statistics, 88, 641–658.CrossRefGoogle Scholar
  27. J. Schafer (1997) Analysis of Incomplete Multivariate Data (London: Chapman & Hall CRC).CrossRefGoogle Scholar
  28. J. Schafer and J. Graham (2002) ‘Missing Data: Our View of the State of the Art’, Psychological Methods, 7, 147–177.CrossRefGoogle Scholar
  29. J. Wooldridge (2002) Econometric Analysis of Cross Section and Panel Data (Cambridge, MA: The MIT Press).Google Scholar

Copyright information

© Peter H. Egger and Farid Toubal 2016

Authors and Affiliations

  • Peter H. Egger
  • Farid Toubal

There are no affiliations available

Personalised recommendations