CEPII, Recherche et Expertise sur l'economie mondiale
One Nation, One Language? Domestic Language Diversity, Trade and Welfare


Tamara Gurevitch
Peter R. Herman
Farid Toubal
Yoto Yotov

 Points clés :
  • We examine how language diversity affects trade and economic welfare.
  • We use the new version of the Ethnologue.com dataset and build linguistic ties between populations in and across nations.
  • In our quantitative general equilirium model, a change in domestic linguistic similarity simultaneously affects both internal as well as international trade frictions. It has direct effects on trade between populations domestically and globally and affects economic welfare.
  • We illustrate the effect of changing domestic linguistic diversity simulating the repeal of Quebec’s Bill 101, which made French an official language in Canada.
  • We show large impacts of domestic linguistic policies on domestic welfare, but not only. Linguistic policies have significant economic consequences that stretch far beyond the country’s own borders because of trade linkages.

 Résumé :
Using new data on linguistic diversity across and within countries, we examine novel channels though which language affects trade patterns and economic welfare. We find that linguistic similarity within a country accounts for about 10 percent of estimated `home bias', demonstrating the importance of shared languages for domestic integration. To highlight the general equilibrium implications of domestic language proximity, we simulate the repeal of Quebec's Bill 101, which made French an official language in Canada and established fundamental language rights for Frenchspeakers. The analysis demonstrates that domestic language diversity has significant implications for Canada's welfare but also sizable economic consequences that stretch far beyond its borders.

 Mots-clés : Common Language | Ethno-linguistic Diversity | Identity | International Trade | Domestic Trade | Domestic Trade Costs | Welfare

 JEL : D60, F14, F19, C54, Z13
CEPII Working Paper
N°2020-15, December 2020

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