Same Same But Different: Dialects and Trade

Language is a strong and robust determinant of international trade patterns: Countries sharing a common language trade significantly more with each other than countries using different languages, holding other factors constant. In this article we present the first analysis of the effect of language on trade in an intra‐national context. Analyzing unique data for a single‐language country, Germany, we find that similarities in the local dialect have a significantly positive impact on regional trade. We interpret this finding as evidence for the trade‐promoting effect of culture, because linguistic similarities likely reflect cultural ties across regions, rather than lower costs of communication or similar institutions.     

Specialisation patterns and the synchronicity of regional employment cycles in Europe

This paper examines the degree of correlation, i.e. the synchronicity, among EU regional employment cycles and attempts to link it to changing patterns of specialisation. This topic deserves attention since the existing evidence seems to suggest a rather limited role for a region’s industry structure in explaining its employment growth. A dynamic panel data model is estimated for pairs of regions by within groups, i.e., by a standard fixed effects estimator. The results indicate that synchronicity between regions has declined and differences in regional industry structure can be held account for this.

FDI promotion through bilateral investment treaties: more than a bit?

Policy makers in developing countries have increasingly pinned their hopes on bilateral investment treaties (BITs) in order to improve their chances in the worldwide competition for foreign direct investment (FDI). However, the effectiveness of BITs in inducing higher FDI inflows is still open to debate. It is in several ways that we attempt to clarify the inconclusive empirical findings of earlier studies. We cover a much larger sample of host and source countries by drawing on an extensive data set on bilateral FDI flows. Furthermore, we account for unilateral FDI liberalization, in order not to overestimate the effect of BITs, as well as for the potential endogeneity of BITs. Employing a gravity-type model and various model specifications, including an instrumental variable approach, we find that BITs do promote FDI flows to developing countries. BITs may even substitute for weak domestic institutions, though probably not for unilateral capital account liberalization.     

Fakten und Fiktionen. Über den Umgang mit Medienwirklichkeiten: Jahrestagung der DGPuK in Münster vom 23. bis 25. Mai 2001

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