The Economics of Language
Shared Languages and Trade
How countries that share a language trade more with each other, why gravity models of trade include language, and how translation technology may change this.
Countries that share a language tend to trade more.
Gravity model
Economists predict trade with a gravity model: bigger and closer economies trade more. Studies add common language and find it raises trade.
Why
- Lower communication costs.
- Easier contracts and negotiation.
- Shared media and tastes.
- Migrant networks.
Examples
- The UK trades heavily with other English-speaking countries.
- Spain and Latin America.
- Francophone Africa and France.
Colonial links
Many shared languages come from colonial history, which also left legal and business ties.
Translation technology
Machine translation may reduce the language barrier, though trust and culture still matter.
An Indian software firm finds it easier to win clients in the US and UK than in Japan, partly because contracts and meetings run in English.
Shared language also lowers trade costs.
- Shared languages raise trade.
- Gravity models include language.
- Lower communication costs explain it.
- Translation tech may shrink the barrier.
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