Tag: Bilateral trade
Culture, Cold War, and Trade
This study evaluates how the impact of cultural differences on trade evolves over time, especially after the Cold War. We show that the negative influence of cultural differences on trade has increased over time. More specifically, it is more prominent in the post-Cold War era than during the Cold War. For instance, two countries with distinct religious majorities have 35% lower bilateral trade flows in the post-Cold War period compared to countries sharing the same majority religion. This negative effect was less than half during the Cold War (16%). In addition, we provide an explanation for the differential impact of cultural differences over time. By mapping out the transition of the effects of cultural and ideological dissimilarities, we show that cold-war ideological blocs might be a reason for the suppression of cultural differences during the Cold War. Therefore, long-term cultural determinants of trade gain more significance by the end of the Cold War and replace ideological differences as a major impediment to international trade.