Cultural Diversity and Export Sophistication

39 Pages Posted: 18 Jul 2018

See all articles by Zhaobin Fan

Zhaobin Fan

Jinan University - International Business School

Sajid Anwar

University of the Sunshine Coast - School of Business

Shujuan Huang

Jinan University - International Business School

Date Written: June 28, 2018

Abstract

By extending the Hausmann et al. (2007)’s theoretical model involving cost discovery, we show that cultural diversity affects export sophistication by increasing the degree of heterogeneity in the economy. Specifically, cultural diversity pushes the technology frontier of the economy outwards, which improves export sophistication level. Our theoretical results suggest that cultural diversity also increases the growth rate of export sophistication by improving the economy’s ability to operate closer to its technology frontier. We use panel data that covers 85 countries over the 1995-2014 period to empirically evaluate our theoretical predictions. Pooled and random effects regression results show that cultural diversity and the degree of export sophistication are positively related and this association is statistically significant. However, fixed effects estimation results show that the impact of cultural diversity on growth rate of export sophistication is statistically insignificant. Finally, we find that the impact of cultural diversity on export sophistication does not vary significantly on an annual basis. However, over longer periods, this effect increases in size.

Keywords: Cultural Diversity; Export Sophistication; Technology Frontier; Cost Discovery; Panel Data Regression

Suggested Citation

Fan, Zhaobin and Anwar, Sajid and Huang, Shujuan, Cultural Diversity and Export Sophistication (June 28, 2018). International Review of Economics & Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3204393

Zhaobin Fan

Jinan University - International Business School ( email )

Zhuhai
China

Sajid Anwar (Contact Author)

University of the Sunshine Coast - School of Business ( email )

90 Sippy Downs Drive
Sippy Downs, QLD 4556
Australia

Shujuan Huang

Jinan University - International Business School ( email )

Zhuhai
China

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