Cultural Proximity and Trade
Gabriel J. Felbermayr
University of Stuttgart-Hohenheim
Paris School of Economics (PSE); Ecole Normale Superieure de Cachan (ENS) - Departement of Economics ans Management; Centre d'Etudes Prospectives et d'Info. Internationales (CEPII)
Cultural proximity may influence bilateral imports through a preference and a trade-cost channel. In empirical gravity models, conventional measures such as common language or religion fail to separately identify those channels. We use bilateral score data from the Eurovision Song Contest, a very popular pan-European television show, to construct a measure of cultural proximity which varies over time and within country pairs, and that correlates strongly with conventional indicators. Its statistical properties allow to identify the trade cost and preference channels. For trade in differentiated goods, we find evidence for both channels, with the latter accounting for at least 65% of the total effect. There is no preference effect for homogeneous goods.
Number of Pages in PDF File: 44
Keywords: International Trade, Gravity Equation, Cultural Proximity, Eurovision Song Contest
JEL Classification: F12, F15, Z10
Date posted: May 16, 2008
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