The Impact of Cultural Context on International Trade: An Empirical Analysis

This study examined the impact of cultural context and linguistic distance on bilateral trade, employing a modified version of the gravity model. The analysis utilized trade data from 117 countries, encompassing 6,623 trading pairs. Bilateral trade was estimated as a function of cultural context, linguistic distance, along with other relevant economic and geographic factors. The findings revealed that linguistic distance does not exert a statistically significant impact on bilateral trade; however, the analysis demonstrated that cultural context plays a significant role in shaping bilateral trade patterns. Specifically, belonging to the same cultural context was found to decrease bilateral trade, while increasing cultural context distance between trading countries was observed to promote trade.