Countries are not perfectly integrated market areas. Even if institutional differences are much smaller within than between countries, there are persistent local cultural differences. These differences act as barriers that reduce economic exchange: bilateral migration, trade, and knowledge...

We investigate whether time-persistent cultural borders impede economic exchange across regions of the same country. To measure cultural differences we evaluate, for the first time in economics, linguistic micro-data about phonological and grammatical features of German dialects. These data are...