Essay On Cultural Proximity

There have been a number of studies that deal with cultural proximity and its impact on trade. The first part will take the effect of conventional cultural factors as a proxy for cultural proximity on trade flows. Later, we will review the relation between cultural goods and trade flow instead of conventional cultural factors such as language and religion, etc.

1. Cultural Proximity and Trade

Our research is related to the literature on economic effects of cultural proximity. In general, cultural proximity can be explained as “nationally or locally produced material that is closer to and more reinforcing of traditional identities, based in regional, ethnic, dialect/language, religious, and other elements” (Straubhaar, 1991). There is growing evidence that cultural proximity is positively associated with trade flow between countries.

On the language side, Fidrmuc and Fidrmuc (2009)

Cheptea (2007) also adds that trade in cultural goods not only transfer information on the origin market, but also implies information on the preferences of consumers in the country of origin. These factors correspond to the determinants of trade that many scholars have recently shown interest. They point out that international trade is promoted through two mechanisms; reduction in information costs and diffusion of preference (Choe and Park, 2008).

In this respect, Disdier et al (2010) empirically suggest evidence that the higher cultural proximity, the larger cultural trade volumes and verify cultural goods can be a proxy for cultural proximity. By extension, they analyze using the data on 239 countries from 1989 to 2005 that the influence of bilateral trade in cultural goods. Results show that cultural goods are significantly positive in overall trade. A 10% increase in cultural exchanges increments overall trade by