Does Ease of Communication Increase Trade? Commonality of Language and Bilateral Trade
| Author | William K. Hutchinson |
| DOI | http://doi.org/10.1111/1467-9485.00247 |
| Published date | 01 November 2002 |
| Date | 01 November 2002 |
DOES EASE OF COMMUNICATION INCREASE
TRADE? COMMONALITY OF LANGUAGE AND
BILATERAL TRADE
William K. Hutchinson*
ABSTRACT
Gravity model explanations of trade volumes frequently include dummy variables
to account for the commonality of language among trading partners. In this paper
we use a data set for the number of people in a country who speak English as a first
language or English as a second language (Crystal, 1997) as an indicator of the
ease with which trade with the United States occurs. Controlling for commodity
fixed effects we use SITC three digit industry data centred on 1995 United States
bilateral trade with 33 countries to determine the effect of the degree of language
commonality on bilateral trade. Both English as a first language and English as a
second language are found to be less important for exports than for imports. This is
true for all three digit industries as well as when the specific industry groups
identified in Rauch (1999) are considered.
II
NTRODUCTION
Which products are traded among countries and the volume of trade in these
products are two questions that have captured the attention of international
trade economists for more than two centuries. Ricardo, Mill, Heckscher, Ohlin,
and others have focused on determining which products would be exported and
which would be imported. In the 1960s interest shifted to determining the
volume of trade and the work of Tinbergen (1962) and Linnemann (1966) are
early examples of such studies. Models of these two aspects of trade, however,
are quite different. Models that determine which products are traded focus on
the relative factor endowments of countries, whereas models of the volume of
trade focus on the relative economic size and well being of countries.
We focus on the determinants of the volume of trade, which are usually
captured in the framework of a gravity model. If one assumes identical and
homothetic preferences, then in a gravity model the relative economic size of
trading partners determines the potential volume of trade. Economic size is
generally measured by some combination of country GDP, population, or per
capita GDP. In a gravity model, the difficulty associated with the exchange of
Scottish Journal of Political Economy, Vol. 49, No. 5, November 2002
#Scottish Economic Society 2002, Published by Blackwell PublishersLtd, 108 Cowley Road, Oxford OX4 1JF, UK and
350 Main Street, Malden, MA 02148, USA
544
*Vanderbilt University, Nashville
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