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Beestermöller, Matthias and Rauch, Ferdinand (11. September 2014): A Dissection of Trading Capital: Cultural persistence of trade in the aftermath of the fall of the Iron Curtain. Discussion Papers in Economics 2014-46 [PDF, 418kB]


We show that the countries of the former Austro-Hungarian monarchy trade significantly more with one another in the aftermath of the collapse of the Iron Curtain than predicted by a standard gravity model. This trade surplus declines linearly and monotonically over time. We argue that these findings suggest that decaying cultural forces explain a significant part of trading capital. We document the rate of decay of these cultural forces.

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