Tea for Two: Language and Bilateral Trade with China

Abstract

The article assesses the importance of cultural discourse in economics by exploring the extroversive cultural link between language use frequency and bilateral trade flows. Using linguistic data from Google n-grams and data on bilateral trade flows with China over the 1821–2008 period, we test whether the frequency of use of the word “tea” in a Chinese trading partner’s language is associated with the nominal value of its trade flows with China. Our findings suggest that the frequency of use of the word tea predicts current and future trade flows with China, and trade flows affect the frequency of use of the word tea albeit to a lesser extent. The frequency of use of the word tea is influenced by the overall size of the Chinese economy irrespective of the size of the economy of China’s trading partner, but smaller countries use the word tea more and increase its use faster. We conclude that the creation of a cultural discourse is endogenous to economic power, and cultural discourse amplifies trade flows. These findings validate the importance of narrative economics and the Culture-Based Development perspective.

Keywords:

• culture
• language
• narrative economics
• bilateral trade
• China

JEL Classification Codes:

• E42
• E50
• E52
• E58

Notes

1 Tea is the world’s most popular non-alcoholic drink (MacFarlane and MacFarlane 2004), and Turkey’s population consumes the most amount of tea per capita (Euromonitor International 2013).

2 There are no known wild populations of the tea plant, so it is not possible to be precise about its original native location (Meegahakumbura et al. 2016).

3 Portugal ran Macao until 1999, but we are unable to analyze the Portuguese language because Google libraries do not provide n-grams for this language at the current time.

4 Michel Fouquin and Jules Hugot (2016, 12) show that total nominal imports are greater than total nominal exports for most years and they argue that this is due to two main reasons. First, customs conventions specify that trade is reported Free on Board to the exporting country and includes the Cost of Insurance and Freight at destination. Second, importing countries have greater incentives to carefully report in-flowing trade as governments generally levy taxes on imports. They also note that this gap reduces from being greater than 10 percent in the nineteenth century, to less than 5 percent after World War II, and to almost zero in the modern era.

5 In the panel setting, we drop the physical distance variable, as it is constant over time.

6 All results were recalculated with controls for tariffs in the partner country. The other results remain substantively the same and the tariffs variable had the expected negative sign. However, the tariffs variable was not always statistically significant, and it decreases the degrees of freedom, so we present what we believe is a parsimonious model.

Additional information

Notes on contributors

Annie Tubadji

Annie Tubadji is at Swansea University.

Don Webber

Don Webber is at the University of Sheffield.