Linguistic Distance and Market Integration in India

The
role of cultural distance in market integration, particularly in the developing
world, has received relatively little attention. Using prices from over 200
South Asian markets spanning 1861 to 1921, we show that linguistic distance
correlates negatively with market integration. A one-standard-deviation
increase in linguistic distance predicts a reduction in the price correlation
between two markets of 0.121 standard deviations for wheat, 0.181 for salt, and
0.088 for rice. While factors like genetic distance, literacy gaps, and railway
connections are correlated with linguistic distance, they do not fully explain
the correlation between linguistic distance and market integration.

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