This paper studies the intangible costs of international trade by extending the basic gravity equation with measures of cultural and institutional distance, and institutional quality. Analyzing a sample of bilateral trade flows between 92 countries in 1999, we find that institutional distance...

Quantitative culture research is dominated by Hofstede’s framework, which is based on survey data collected in the late 1960s and early 1970s. As countries develop economically, modernization theory predicts shifting societal values, which likely affect country’s scores on Hofstede’s...