"Linguistic Distance" as a Determinant of Bilateral Trade

Abstract

We introduce a measure of language difficulty called "linguistic distance" into a modified gravity model to determine whether the fact that a language is further away from English affects the level of trade. Our sample of 36 non-English speaking countries includes Japan and South Korea, which we argue are special cases due to World War II, the Korean War, and subsequent close political and economic ties with the United States. Presence of a stock of immigrants in the home country has been shown to enhance trade, both exports and imports, with the country of origin. Controlling for network and information attributes provided by the presence of a stock of immigrants, the special relationship with Japan and Korea, and the standard gravity model variables, we find that the further a country¬πs primary language is from English, the lower trade will be between the United States and that country. These results hold for aggregate exports and imports as well as for exports and imports of consumer manufactures and producer manufactures.