Working Paper: CEPR ID: DP3590
Authors: Jacques Melitz
Abstract: The significance of a common language in foreign trade hinges on translation as well as the ability to communicate directly. In fact, without admitting the facility of translation from one or two selected languages, it is impossible to explain adequately the impact of a common language on foreign trade. Linguistic diversity at home also promotes foreign trade. But the most significant linguistic influence of all on foreign trade is the ability to read and write any language whatever. Besides these basic results, the study examines three special issues: whether English and other European languages are more effective than other languages in promoting foreign trade; whether there are substitution effects of a common language in foreign trade; and whether network externalities of language impinge on foreign trade.
Keywords: foreign trade; gravity model; language
JEL Codes: F10; F40
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Network externalities of language (F69) | benefits of a common language (F36) |
| A common language (P32) | trade with other countries (F10) |
| A common language (P32) | foreign trade (F10) |
| Linguistic diversity at home (J15) | foreign trade (F10) |
| Literacy (G53) | foreign trade (F10) |