Does international trade favor proximity in cultural beliefs?

Abstract

Cultural proximity has been considered as a crucial determinant of bilateral trade flows. Scant emphasis has, instead, been devoted to the investigation of the opposite direction of causality. International trade eases contacts and increases trust among contracting parties and may, then, promote the spread of cultural beliefs across borders. By using World and European Values Surveys data, we provide evidence on the role of trade flows in favoring countries' cultural convergence for a large sample of countries over the period 1989-2014. Results confirm that international trade narrows differences in cultural beliefs and attitudes, but just when trade partners share some culture-related traits. Common ancestry, religion and legal system as well as high historical bilateral migration flows are necessary conditions for trade reducing cultural distance. Also, the convergence effect turns to be completely driven by trade flows of differentiated goods which entail relationship-specific investments and a deeper commitment between contracting parties.