Clustering by Linguistic Characteristics and International Trade

This study focuses on the effects of similar language structures on bilateral trade between countries. While it has been established in the literature that countries sharing the same language trade more, we believe this is just a sub-case of a more general phenomenon that has to do with the fact that trade barriers are significantly reduced in case the negotiating parties share the same way of thinking. This in turn, we believe, is strongly linked to the language structure. By using a comprehensive database of language structures and bilateral trade flows, we confirm our hypothesis by finding that linguistic structural similarity is producing a strong effect on the international trade flows, which is independent of the extent to which the two trading partners' principal languages are mutually intelligible. This study emphasizes the need for more research linking the stock of knowledge accumulated by the science of psychology to economics, and the often overlooked importance of insights that can be suggested by cluster analysis