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By Joshua Curtis
Using a regression discontinuity design on a gravity model of trade among 36 Middle Eastern and East Asian countries between 1980 and 2014, this study demonstrates network effects in trade. A small improvement in trade between subsets of two cultural blocs diminishes the effect of cultural similarity on trade between all members of the two cultural blocs. The result holds regardless of whether cultural similarity was originally a boon or drag on trade. Furthermore, international businesses adjust to new intercultural acumen very rapidly. The effect demonstrated herein points toward an answer to economic dilemmas posed by Huntington’s “clash of civilizations.”
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Advisor: Dr. Lori Leachman, | JEL Codes: F1, F5, B27