National and Regional Economics VIII Foreign Languages and Trade * (original) (raw)
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Foreign languages and trade: evidence from a natural experiment
Empirical Economics, 2015
Cultural factors and common languages are well-known determinants of trade. By contrast, the knowledge of foreign languages was not explored in the literature so far. We combine traditional gravity models with data on fluency in the main languages used in EU and candidate countries. We show that widespread knowledge of languages is an important determinant for foreign trade, with English playing an especially important role. The robustness of our results is confirmed by quantile regressions.
European Economic Review, 2008
While language plays an important role in gravity models, there has been little attention to the channels through which a common language promotes bilateral trade. This work proposes separate series for a common language depending upon whether ease of communication facilitates trade through translation or the ability to communicate directly. The series related to direct communication is far more important in explaining bilateral trade, but the other series, based on translation, makes a distinct contribution as well. Either measure of a common language outperforms the measure in popular use, which is implicitly related to translation, and a combination of the two does far better. In addition, the paper examines the effect of two country-specific linguistic influences on trade: Literacy and linguistic diversity at home. Both of these influences promote foreign relative to domestic trade. Finally, the article studies the separate roles of English and network externalities. r 2007 Elsevier B.V. All rights reserved. JEL classification: F10; F40
Journal of Research in Emerging Markets
Prior studies have investigated the role of economic and noneconomic variables on international trade. A major factor, which has been studied less, is the language used in transactions and negotiations. We explore the effects of language connectedness and the Arabic language on international trade in thirteen countries in the Middle East and North Africa (MENA) region. We used a panel of bilateral data and gravity model for the countries of the region over the 2000 to 2018 period. Our analytic technique was the Poisson pseudo-maximum-likelihood (PPML) estimation method. The empirical outcomes indicate that speaking Arabic leads to an increase in export, that is, Arab nations prefer to export to the countries whose people speak their language. In addition, the language connectedness index, which depends on the extent to which the country's languages are spoken outside the country, is positively associated with the levels of exports and imports. Results further show that the GDP, ...
Why Does Language Matter ? Evidence from Eu and Mercosur Trade
2017
International trade has been increasing not only due to globalization, but also due to the economic integration process of the past century. However, there are still some barriers that hinder international trade and one of those can be the different languages spoken by both trading partners. Therefore, language may influence the choice of an international trading partner, since it can increase or decrease transaction costs. On the other hand, the creation of trading blocs, such as the European Union (EU) and the Southern Common Market (Mercosur), has enabled national economies to profit from regional trade networks. In this paper we look at the relationship between Portuguese exports and the dominant language in the destination country, while also analysing the influence of belonging to these two trading blocs. Taking a closer look at Portuguese data, we conclude that language similarity plays a relevant role in the choice of international trading partners, as does belonging to the EU.
2016
In an increasingly global and networked economy, companies have a wider market at their disposal but also a number of barriers they have to overcome in order to expand their business internationally. When the decision of trading with another country is made, one of the key issues companies have to deal with is language: language barriers can hinder international trade, while language similarities can boost it due to the weight of communication costs. The economics of language is an interdisciplinary field of study that aims to bring together reflections on the role of language in the economy and conversely on how the economy affects language choices. In this study we focus on the relationship between international trade and language barriers by analysing Portuguese exports of goods and find that language does play an important role in the choice of foreign trading partners although sharing Portuguese as the common language with a group of countries does not imply exporting more to t...
The influence of language similarity in international trade
2016
Communication plays a key role in today’s globalized society, particularly when it comes to international trade, where agents need to understand each other in order to do business. Finding trading partners in distant parts of the world is now much easier but it also involves overcoming a number of barriers that contribute to increased trading costs. Working within the framework of the economics of language, in this paper we focus on communication costs, more specifically on those imposed by language barriers: although trading with a foreign partner that shares the same language decreases communication costs, trading with a foreign partner when no common language is available to both partners implies hiring some sort of intermediary, which will consequently increase those costs. Our findings suggest that Portuguese companies are effectively taking advantage of their collaborators’ proficiency in English and Spanish to promote trade. On the other hand, we believe that the network of P...
How does language affect the choice of foreign trading partners?
2016
UID/LIN/03213/2013In an increasingly global and networked economy, companies have a wider market at their disposal but also a number of barriers they have to overcome in order to expand their business internationally. When the decision of trading with another country is made, one of the key issues companies have to deal with is language: language barriers can hinder international trade, while language similarities can boost it due to the weight of communication costs. The economics of language is an interdisciplinary field of study that aims to bring together reflections on the role of language in the economy and conversely on how the economy affects language choices. In this study we focus on the relationship between international trade and language barriers by analysing Portuguese exports of goods and find that language does play an important role in the choice of foreign trading partners although sharing Portuguese as the common language with a group of countries does not imply e...
Culture, Languages, and Economics
The impact of various facets of cultural diversity on economic outcomes has become a topic of intensive research in economics. This paper focuses on linguistic diversity as one of the important aspects of cultural heterogeneity, and more specifically, The aim of this paper is to formally examine two opposing forces, standardization and efficiency on the one hand, and cultural attachment and linguistic disenfranchisement, on the other, and to outline ways of bringing them to balance each other. In our measurement of disenfranchisement and fractionalization we heavily rely on the notion of linguistic distances or proximity between various linguistic groups. We also analyze the impact of linguistic diversity on trade, migration and markets for translation. We conclude by examining the issue of disenfranchisement in the European Union and possible standardization policies to address this issue.
Gravity, the English language and international business
Purpose – The purpose of this paper is to test the merits of the view that the English language has emerged as the dominant language in international business. If there is merit to this view, then the ability to speak English and its role as a lingua franca in the global economy would imply that countries which have English as an official language should have a benefit over non-English-speaking countries visa `-vis their abilities to undertake international business. Design/methodology/approach – Within an augmented gravity model framework, the importance of the English language in explaining bilateral foreign direct investment (FDI) data within the OECD is tested. In addition to English, all other common official languages within the OECD are also tested. Furthermore, the linguistic distance to English is used to test whether closeness of languages to English enhance international business activity. Findings – The results indicate that English-speaking countries within the OECD do have a benefit that comes with the English language. Furthermore, countries whose official languages are linguistically close to English benefit from the special role played by the English language. These results therefore highlight the importance of the English language in deploying multinational strategies, even in countries whose official language is not English. Research limitations/implications – These results therefore indicate the importance of the English language in international business. As such, having a proficiency with English within any corporation should enhance that corporation's ability to engage in international business. Originality/value – Sharing a common language with FDI partners enhances the ability to communicate, and hence enhances FDI between the countries. This paper extends this evidence to show that when the common language is English, the common language effect is strongest.