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Culture and Trade in the European Union

Author

Listed:
  • L. Cyrus, Teresa

    (Dalhousie University)

Abstract
Since its origin, the European Union has focused on removing barriers to the full integration of its members’ economies. While formal institutions have been adapted, informal social norms may have also changed. In this paper, variables from the World Values Survey are used to estimate the cultural distance between countries to examine the extent to which cultural distance and bilateral trade are related. Cultural distance reflects the differences between two countries’ norms and beliefs. It is predicted that cultural distance reduces trade while trade reduces cultural distance. Fixed-effects regressions for exports and cultural distance show that, contrary to the prediction, cultural distance raises trade and trade raises cultural distance. However, these results are questionable due to the potential problem of endogeneity. Once the problem of endogeneity is addressed with the use of simultaneous equations, the results show that, in fact, cultural distance has no effect on trade, while trade reduces cultural distance.

Suggested Citation

  • L. Cyrus, Teresa, 2015. "Culture and Trade in the European Union," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 30(2), pages 206-239.
    • Handle: RePEc:ris:integr:0657
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    Citations

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    Cited by:

    1. Frank, Jonas, 2018. "The effect of culture on trade over time: New evidence from the GLOBE data set," Hohenheim Discussion Papers in Business, Economics and Social Sciences 18-2018, University of Hohenheim, Faculty of Business, Economics and Social Sciences.
    2. Liu, Ailan & Lu, Cuicui & Wang, Zhixuan, 2020. "The roles of cultural and institutional distance in international trade: Evidence from China's trade with the Belt and Road countries," China Economic Review, Elsevier, vol. 61(C).
    3. Bastos, Paulo & Silva, Joana, 2012. "Networks, firms, and trade," Journal of International Economics, Elsevier, vol. 87(2), pages 352-364.
    4. Mengjun Xie, 2018. "Can Cultural Affinity Promote Trade ? HSK Test Data from the Belt and Road Countries," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 26(3), pages 109-126, May.

    More about this item

    Keywords

    Trade; Culture; Gravity; European Union;
    All these keywords.

    JEL classification:

    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F15 - International Economics - - Trade - - - Economic Integration

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