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Güneş Gökmen

Bocconi University, Milan, Italy

Abstract: We show that cultural dissimilarity dampens bilateral trade. More importantly, this paper is the first study to probe Huntington’s the Clash of Civilizations hypothesis from an economic perspective. We analyze the dynamics of the effect of cultural heterogeneity on trade and provide evidence that the negative influence of cultural differences on trade is far more accentuated in the post-Cold War era than during the Cold War. For instance, two countries with distinct religious majorities have 35% lower bilateral import flows during the post-Cold War period compared to those countries sharing the same majority religion, whereas this effect is less than half, 16%, during the Cold War. In addition, we provide an explanation for the differential impact of cultural dissimilarity over time. By mapping out the transition of the effects of cultural and ideological dissimilarities, we find that cold-war ideological blocs were the reason for the suppression of cultural differences. Therefore, cultural differences come to the forefront as a trade barrier only in the post-Cold War period, after the demise of ideological rivalries.

Keywords: Cold War, culture, economic clash, trade.

Full Text:  “Cultural Diversity a Barrier to Riches?”