Cultural and Institutional Determinants of Bilateral Trade Flows

@inproceedings{Groot2005CulturalAI,
  title={Cultural and Institutional Determinants of Bilateral Trade Flows},
  author={Henri L. F. de Groot and Sjoerd Beugelsdijk},
  year={2005}
}
This paper studies the intangible costs of international trade by extending the basic gravity equation with measures of cultural and institutional distance, and institutional quality. Analyzing a sample of bilateral trade flows between 92 countries in 1999, we find that institutional distance has a negative effect on bilateral trade, presumably because the transaction costs of trade between partners from dissimilar institutional settings are high. In contrast, we find that cultural distance has… CONTINUE READING

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