Cultural Diversity a Barrier to Riches? Gunes Gokmen New Economic School Culture, Diversity and Development October 2013 Gokmen (NES) Culture and Trade October 2013 1 / 30
Motivation "The Clash of Civilizations?" (Samuel Huntington, 1993) Gokmen (NES) Culture and Trade October 2013 2 / 30
Motivation "The Clash of Civilizations?" (Samuel Huntington, 1993) I Fundamental source of clashes in the post-Cold War era will not be primarily ideological or primarily economic Gokmen (NES) Culture and Trade October 2013 2 / 30
Motivation "The Clash of Civilizations?" (Samuel Huntington, 1993) I Fundamental source of clashes in the post-Cold War era will not be primarily ideological or primarily economic I But, the dominating source of clashes will be cultural Gokmen (NES) Culture and Trade October 2013 2 / 30
Motivation "The Clash of Civilizations?" (Samuel Huntington, 1993) I Fundamental source of clashes in the post-Cold War era will not be primarily ideological or primarily economic I But, the dominating source of clashes will be cultural Studies limited to military con‡ict (Chiozza, 2002; Russett et al., 2000) Gokmen (NES) Culture and Trade October 2013 2 / 30
Motivation "The Clash of Civilizations?" (Samuel Huntington, 1993) I Fundamental source of clashes in the post-Cold War era will not be primarily ideological or primarily economic I But, the dominating source of clashes will be cultural Studies limited to military con‡ict (Chiozza, 2002; Russett et al., 2000) Economic implications went unexamined Gokmen (NES) Culture and Trade October 2013 2 / 30
Motivation "The Clash of Civilizations?" (Samuel Huntington, 1993) I Fundamental source of clashes in the post-Cold War era will not be primarily ideological or primarily economic I But, the dominating source of clashes will be cultural Studies limited to military con‡ict (Chiozza, 2002; Russett et al., 2000) Economic implications went unexamined An economic clash of cultures proxied by bilateral trade relations? Gokmen (NES) Culture and Trade October 2013 2 / 30
Culture? How to measure culture to analyze barriers to trade? Gokmen (NES) Culture and Trade October 2013 3 / 30
Culture? How to measure culture to analyze barriers to trade? Culture is elusive: values, beliefs, customs, codes, rituals, etc. Gokmen (NES) Culture and Trade October 2013 3 / 30
Culture? How to measure culture to analyze barriers to trade? Culture is elusive: values, beliefs, customs, codes, rituals, etc. Four measures of culture to capture di¤erent aspects of it Gokmen (NES) Culture and Trade October 2013 3 / 30
Culture? How to measure culture to analyze barriers to trade? Culture is elusive: values, beliefs, customs, codes, rituals, etc. Four measures of culture to capture di¤erent aspects of it I Civilizations Gokmen (NES) Culture and Trade October 2013 3 / 30
Culture? How to measure culture to analyze barriers to trade? Culture is elusive: values, beliefs, customs, codes, rituals, etc. Four measures of culture to capture di¤erent aspects of it I Civilizations I Religion Gokmen (NES) Culture and Trade October 2013 3 / 30
Culture? How to measure culture to analyze barriers to trade? Culture is elusive: values, beliefs, customs, codes, rituals, etc. Four measures of culture to capture di¤erent aspects of it I Civilizations I Religion I Ethnicity Gokmen (NES) Culture and Trade October 2013 3 / 30
Culture? How to measure culture to analyze barriers to trade? Culture is elusive: values, beliefs, customs, codes, rituals, etc. Four measures of culture to capture di¤erent aspects of it I Civilizations I Religion I Ethnicity I Language Gokmen (NES) Culture and Trade October 2013 3 / 30
Culture and Trade International trade an important component of national income Gokmen (NES) Culture and Trade October 2013 4 / 30
Culture and Trade International trade an important component of national income I e.g. Russia’s trade to GDP ratio in 2009 = 24% (OECD) Gokmen (NES) Culture and Trade October 2013 4 / 30
Culture and Trade International trade an important component of national income I e.g. Russia’s trade to GDP ratio in 2009 = 24% (OECD) Barriers to trade (McCallum, 1995; Anderson, 2011) Gokmen (NES) Culture and Trade October 2013 4 / 30
Culture and Trade International trade an important component of national income I e.g. Russia’s trade to GDP ratio in 2009 = 24% (OECD) Barriers to trade (McCallum, 1995; Anderson, 2011) I Examples: Borders, Distance, Legal Barriers, etc. Gokmen (NES) Culture and Trade October 2013 4 / 30
Culture and Trade International trade an important component of national income I e.g. Russia’s trade to GDP ratio in 2009 = 24% (OECD) Barriers to trade (McCallum, 1995; Anderson, 2011) I Examples: Borders, Distance, Legal Barriers, etc. Cultural di¤erences: a barrier to international trade Gokmen (NES) Culture and Trade October 2013 4 / 30
Culture and Trade International trade an important component of national income I e.g. Russia’s trade to GDP ratio in 2009 = 24% (OECD) Barriers to trade (McCallum, 1995; Anderson, 2011) I Examples: Borders, Distance, Legal Barriers, etc. Cultural di¤erences: a barrier to international trade I Source of uncertainty Gokmen (NES) Culture and Trade October 2013 4 / 30
Culture and Trade International trade an important component of national income I e.g. Russia’s trade to GDP ratio in 2009 = 24% (OECD) Barriers to trade (McCallum, 1995; Anderson, 2011) I Examples: Borders, Distance, Legal Barriers, etc. Cultural di¤erences: a barrier to international trade I Source of uncertainty I Informational costs of doing business Gokmen (NES) Culture and Trade October 2013 4 / 30
What are we after? Does cultural dissimilarity a¤ect bilateral trade? Gokmen (NES) Culture and Trade October 2013 5 / 30
What are we after? Does cultural dissimilarity a¤ect bilateral trade? I Empirical analysis of bilateral trade ‡ows, 144 countries, 1950-2006 Gokmen (NES) Culture and Trade October 2013 5 / 30
What are we after? Does cultural dissimilarity a¤ect bilateral trade? I Empirical analysis of bilateral trade ‡ows, 144 countries, 1950-2006 I Cultural dissimilarity dampens bilateral trade Gokmen (NES) Culture and Trade October 2013 5 / 30
What are we after? Does cultural dissimilarity a¤ect bilateral trade? I Empirical analysis of bilateral trade ‡ows, 144 countries, 1950-2006 I Cultural dissimilarity dampens bilateral trade Does cultural dissimilarity have a stronger impact on trade in the post-Cold War era? Gokmen (NES) Culture and Trade October 2013 5 / 30
What are we after? Does cultural dissimilarity a¤ect bilateral trade? I Empirical analysis of bilateral trade ‡ows, 144 countries, 1950-2006 I Cultural dissimilarity dampens bilateral trade Does cultural dissimilarity have a stronger impact on trade in the post-Cold War era? I Negative impact of cultural di¤erences on trade is stronger in the post-Cold War era than during the Cold War Gokmen (NES) Culture and Trade October 2013 5 / 30
What are we after? Does cultural dissimilarity a¤ect bilateral trade? I Empirical analysis of bilateral trade ‡ows, 144 countries, 1950-2006 I Cultural dissimilarity dampens bilateral trade Does cultural dissimilarity have a stronger impact on trade in the post-Cold War era? I Negative impact of cultural di¤erences on trade is stronger in the post-Cold War era than during the Cold War What is the underlying mechanism for the di¤erential impact of cultural dissimilarity over time? Gokmen (NES) Culture and Trade October 2013 5 / 30
What are we after? Does cultural dissimilarity a¤ect bilateral trade? I Empirical analysis of bilateral trade ‡ows, 144 countries, 1950-2006 I Cultural dissimilarity dampens bilateral trade Does cultural dissimilarity have a stronger impact on trade in the post-Cold War era? I Negative impact of cultural di¤erences on trade is stronger in the post-Cold War era than during the Cold War What is the underlying mechanism for the di¤erential impact of cultural dissimilarity over time? I Suppression of cultural di¤erences by ideology during the Cold War Gokmen (NES) Culture and Trade October 2013 5 / 30
Related Literature Cultural barriers to trade (Felbermayr and Toubal, 2010; Guiso et al., 2009) Gokmen (NES) Culture and Trade October 2013 6 / 30
Related Literature Cultural barriers to trade (Felbermayr and Toubal, 2010; Guiso et al., 2009) I Dynamics of the e¤ect of cultural heterogeneity on trade Gokmen (NES) Culture and Trade October 2013 6 / 30
Related Literature Cultural barriers to trade (Felbermayr and Toubal, 2010; Guiso et al., 2009) I Dynamics of the e¤ect of cultural heterogeneity on trade Clash of Civilizations thesis (Chiozza, 2002; Russett et al., 2000) Gokmen (NES) Culture and Trade October 2013 6 / 30
Related Literature Cultural barriers to trade (Felbermayr and Toubal, 2010; Guiso et al., 2009) I Dynamics of the e¤ect of cultural heterogeneity on trade Clash of Civilizations thesis (Chiozza, 2002; Russett et al., 2000) I First to study it from an economic perspective Gokmen (NES) Culture and Trade October 2013 6 / 30
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