Melting Pot or Salad Bowl : Cultural Effects on Industrial Integration during Trade Liberalization

This paper examines the impact of culture on industrial similarity during the trade liberalization process between 1998 and 2007. The identification strategy relies on the regional variation in exposure to trade and compares the industrial structures of pairs of adjacent counties that do or do not share the same dialect. The results show that trade accelerates industrial similarity for all neighboring counties. However, the development of similarity is asymmetrical across regions and over time. In particular, industries in neighboring counties belonging to different dialect regions become more similar and connected than those within the same dialect region. The rise in industrial similarity is being fueled by the emergence of high-skill-intensive businesses as a result of trade-related technology spillovers. Adjacent counties of different dialects have greater skill endowments, which facilitate information transfer