An Analysis of the Effects of Cultural, Religious, and Linguistic Differences on International Trade

Abstract

This study analyzes the effects of cultural, religious, and linguistic differences on bilateral trade. We conceptualize these differences as cultural distance, religious distance, religious denominations difference, language diversity, and linguistic distance. We collect trade data for more than 50 countries over ten consecutive years and build an augmented gravity model. The empirical analysis reveals that language diversity impedes trade, but variations in cultural distance and religiosity tend to facilitate bilateral trade. The findings suggest that cultural and religious dissimilarities between partners are not necessarily detrimental to international trade as some differences in culture and religiosity can promote international trade.