Cultural Proximity: A Source of Trade Flow Resilience?

21 Pages Posted: 20 Jul 2018

Date Written: July 2018

Abstract

While the significant influence of cultural proximity on bilateral trade flows has been extensively documented in the literature, its possible role in times of crisis has not yet been raised. Relying on a panel estimation of a gravity model incorporating cultural proximity parameters, we evidence the existence of a significant surge in the impact of the different components of cultural proximity during economic recession. The trade resilience among countries sharing a cultural bond is not a pure composition effect as it also appears within product categories. To understand this unexpected effect, we discuss different mechanisms that emphasise the potential mitigating influence of cultural proximity on some determinants of the trade collapse, namely the uncertainty shock, the increased moral hazard and the emergence of ethnocentric preferences.

Keywords: bilateral trade, cultural proximity, financial crisis, trade resilience

Suggested Citation

Carrère, Céline and Masood, Maria, Cultural Proximity: A Source of Trade Flow Resilience? (July 2018). The World Economy, Vol. 41, Issue 7, pp. 1812-1832, 2018, Available at SSRN: https://ssrn.com/abstract=3216836 or http://dx.doi.org/10.1111/twec.12646

Céline Carrère (Contact Author)

University of Geneva ( email )

102 Bd Carl-Vogt
Genève, CH - 1205
Switzerland

Maria Masood

University of Geneva

102 Bd Carl-Vogt
Genève, CH - 1205
Switzerland

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
1
Abstract Views
110
PlumX Metrics