Intangible Barriers to Trade: The Impact of Institutions, Culture, and Distance on Patterns of Trade

PhD Thesis# 371
Author:
Dr. Gert-Jan (G.J.M.) Linders
Supervisor(s):
prof.dr. P. Nijkamp, prof.dr. P. Rietveld, dr. H.L.F. de Groot
Date:
2006-02-14

Abstract

Despite the growth of trade over recent decades and the popular predictions of a ‘borderless world’ and ‘the death of distance’, substantial barriers to international trade exist and are strikingly persistent. This thesis intends to contribute to the understanding of observed variation in international trade patterns by considering the effects of intangible barriers to trade, related to institutional and cultural differences between countries.
First, a quantitative study of the empirical literature illustrates the importance of barriers to trade. It shows that physical distance substantially affects the intensity of trade, and has even increased in importance over time.
Subsequently, the thesis empirically investigates the effects of institutional and cultural barriers to trade, using the gravity model of bilateral trade. The analysis indicates that good governance promotes international trade. If countries share a similar level of institutional quality, this independently stimulates trade as well. The analysis also shows that the impact of institutions varies at the disaggregate level of trade, distinguishing between differentiated and homogeneous goods. Finally, although unfamiliarity with foreign cultures (in terms of language differences and geographic distance) reduces trade, differences in cultural values appear to increase trade.

Publisher of the TI-theses is: Rozenberg Publishing Services