Genetic distance, cultural differences, and the formation of regional trade agreements

Abstract

Genetic distance between countries' populations has been shown to proxy crosscountry differences in cultures and preferences. In a panel of 176 countries from 1970 to 2014, we find that higher genetic distance between two countries decreases their probability of having a trade agreement, even when controlling for geographic distance and other controls. The impact of cultural differences proxied by genetic distance is persistent over time and economically significant: while increasing the geographic distance between two countries by 1% decreases the probability of a regional trade agreement by 1.6%, increasing their genetic distance by 1% decreases the probability by 0.9%.

Cultural distance and bilateral trade: A transitional economy perspective

“…Exporting manufacturing goods to culturally distant nations can present challenges related to cultural standards, language barriers, and differences in business processes (Aroshidze et al, 2019). Existing literature also identify cultural differences that cause unfamiliarity, diminished levels of mutual trust, and misunderstandings (Bobina et al, 2023;Heid & Lu, 2022;Sun, Mostafiz, et al, 2023).…”

“…Nevertheless, cultural disparities lead to ambiguity, a dearth of confidence, and misinterpretations, all of which result in higher trade costs in Bangladesh and often create difficulties in forming and maintaining long-term relationships with trading partners. However, existing literature often examines the impact of cultural distance on trade, with a particular focus on industrialized and developing countries (Boisso & Ferrantino, 1997;Heid & Lu, 2022;. There has been limited research on how cultural distance affects trade in transitioning economies or less developed countries.…”

“…Liu et al (2020) employed a gravity model to analyze the cultural and institutional distance effects on China's bilateral trade relations. Existing literature often examines the impact of cultural distance on trade, with a particular focus on industrialized and developing countries (Boisso & Ferrantino, 1997;Heid & Lu, 2022;. There has been limited research on how cultural distance affects trade in transitioning economies or less developed countries.…”

Untitled

“…Последователи второго подхода, наоборот, считают, что, при прочих равных условиях, культурные различия сказываются отрицательно на эффективности взаимной торговли, а культурное сходство стран способствует ведению более активной внешнеэкономической деятельности стран (Heid, Lu, 2022;Doanh et al, 2022;Kogut, Singh, 1988;Boisso, Ferrantino, 1997). Исследуя взаимные оценки на международном конкурсе «Евровидение», Г. Фебельмайер и Ф. Тоубэл (Felbermayr, Toubal, 2010) доказали, что культурная близость стран имеет значительный положительный эффект для активности ведения внешней торговли.…”