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Modeling cultural barriers in international trade

Author

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  • Istvan Konya

    (Boston College)

Abstract
The paper presents a model that analyses the role of cultural differences in international trade. The decision to study foreign cultures and languages is incorporated into a simple trade model, which captures some basic properties of cultural and language barriers. First, cultural costs differ from physical ones in that they can be eliminated by learning. Second, learning a language has economies of scale, thus smaller countries tend to invest more into learning. Third, learning decisions within one country impose an externality on trading partners, since learning by one party makes communication easier also for the other one. This implies that learning decisions are in general inefficient, and the paper derives the connection between the equilibrium and optimal outcomes. Finally, because of the substitutability of learning among countries, a policy where a country discourages learning - "cultural protectionism" - can be rationalized. Under certain conditions, such a policy can improve global welfare, not just that of the protecting country.

Suggested Citation

  • Istvan Konya, 2002. "Modeling cultural barriers in international trade," Boston College Working Papers in Economics 547, Boston College Department of Economics.
    • Handle: RePEc:boc:bocoec:547
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Kandogan, Yener, 2011. "Determinants of individuals' preference for cross-cultural literacy: Role of international trade potential," Journal of World Business, Elsevier, vol. 46(3), pages 328-336, July.
    2. Aurélien Portuese, 2012. "Law and economics of the European multilingualism," European Journal of Law and Economics, Springer, vol. 34(2), pages 279-325, October.
    3. Jaeok Park, 2015. "Cultural Barriers in International Trade and the," Korean Economic Review, Korean Economic Association, vol. 31, pages 267-300.
    4. James Foreman-Peck & Peng Zhou, 2015. "Firm-Level Evidence for the Language Investment Effect on SME Exporters," Scottish Journal of Political Economy, Scottish Economic Society, vol. 62(4), pages 351-377, September.
    5. Pablo Sigfrido Corte Cruz., 2020. "La apertura comercial de los productos culturales de México (2008-2017). (The Trade Openness of Cultural Products of Mexico (2008-2017))," Ensayos Revista de Economia, Universidad Autonoma de Nuevo Leon, Facultad de Economia, vol. 0(2), pages 115-142, November.
    6. István Kónya, 2005. "Minorities and majorities: a dynamic model of assimilation," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 38(4), pages 1431-1452, November.
    7. Muntasir Murshed & Seemran Rashid, 2020. "An Empirical Investigation of Real Exchange Rate Responses to Foreign Currency Inflows: Revisiting the Dutch Disease Phenomenon in South Asia," The Economics and Finance Letters, Conscientia Beam, vol. 7(1), pages 23-46.
    8. Laurent Didier, 2019. "Soft power and exporters behavior in international trade," Economics Bulletin, AccessEcon, vol. 39(4), pages 2595-2614.
    9. Alexander M. Danzer & Firat Yaman, 2013. "Do Ethnic Enclaves Impede Immigrants' Integration? Evidence from a Quasi-experimental Social-interaction Approach," Review of International Economics, Wiley Blackwell, vol. 21(2), pages 311-325, May.
    10. Cyrus Teresa L., 2012. "Cultural Distance and Bilateral Trade," Global Economy Journal, De Gruyter, vol. 12(4), pages 1-25, December.
    11. Istvan Konya, 2001. "Optimal Immigration, Assimilation and Trade," Boston College Working Papers in Economics 507, Boston College Department of Economics.
    12. Firat Demir & Hyeonjin Im, 2020. "Effects of cultural institutes on bilateral trade and FDI flows: Cultural diplomacy or economic altruism?," The World Economy, Wiley Blackwell, vol. 43(9), pages 2463-2489, September.

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    More about this item

    Keywords

    International trade; Trade Costs; Culture; Strategic Interactions;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue

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