Linguistic and Religious Influences on Foreign Trade: Evidence from East Asia
Using a modified gravity model and the cross-sectional data of East Asian economies, the present paper presents evidence that supports the view that the effect of distance-related transaction costs on trade tends to fall over time. Overall religious influence on foreign trade exists in the post-Cold War period but not during the Cold War period. The effects of language on inter-regional trade and of religion on intra-regional trade both weaken over time. In all cases, religion tends to have more significant influences on intra-regional trade than language, and language tends to exert more significant influences on inter-regional trade than religion. Finally, from 1985 to 1995 there is an indication that: (i) English becomes more important for inter-regional trade; (ii) Bahasa, English and Khmer become less important for intra-regional trade; and (iii) Chinese plays an increasing role in both intra-regional and inter-regional trade.
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