The influence of language similarity in international trade: Evidence from Portuguese exports in 2013

Communication plays a key role in today’s globalized society, particularly when it comes to international trade, where agents need to understand each other in order to do business. Finding trading partners in distant parts of the world is now much easier but it also involves overcoming a number of barriers that contribute to increased trading costs. Working within the framework of the economics of language, in this paper we focus on communication costs, more specifically on those imposed by language barriers: although trading with a foreign partner that shares the same language decreases communication costs, trading with a foreign partner when no common language is available to both partners implies hiring some sort of intermediary, which will consequently increase those costs. Our findings suggest that Portuguese companies are effectively taking advantage of their collaborators’ proficiency in English and Spanish to promote trade. On the other hand, we believe that the network of Portuguese speaking countries is underrepresented when we consider Portuguese exports