Culture and market integration: evidence on mechanisms

Crawford School of Public Policy | Arndt-Corden Department of Economics

Event details

ACDE Seminar

Date & time

Tuesday 29 November 2016
2.00pm–3.30pm

Venue

Seminar Room E, Coombs Building 9, Fellows Road, ANU

Speaker

Sarah Walker, University of New South Wales.

Culture is an important determinant of economic exchange, but what are the mechanisms through which culture operates? This article offers a novel explanation, arguing that beyond the efficiency of information-sharing, cultural networks distort trade when a dominant group holds market power in the production of certain goods. The empirical analysis examines the relationship between culture and market integration in 19th century Austria. I argue that Catholic market power in agricultural production, as a result of institutional discrimination against religious minorities, inhibited market integration. The empirical analysis establishes that religious differences between provinces increase price gaps, with no observable effect of ethno-linguistic identity. Moreover, the data confirm a price discrimination mechanism and reject an information-sharing story. The estimates are robust to the consideration of reductions in transport costs, showing that railroads failed to promote market integration due to the fact that connections were built between religiously similar places, thereby reinforcing existing trade barriers.

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