Tea for Two: Language and Bilateral Trade with China

The article assesses the importance of cultural discourse in economics by exploring the extroversive cultural link between language use frequency and bilateral trade flows. Using linguistic data from Google n-grams and data on bilateral trade flows with China over the 1821–2008 period, we test whether the frequency of use of the word "tea" in a Chinese trading partner's language is associated with the nominal value of its trade flows with China. Our findings suggest that the frequency of use of the word tea predicts current and future trade flows with China, and trade flows affect the frequency of use of the word tea albeit to a lesser extent. The frequency of use of the word tea is influenced by the overall size of the Chinese economy irrespective of the size of the economy of China's trading partner, but smaller countries use the word tea more and increase its use faster. We conclude that the creation of a cultural discourse is endogenous to economic power, and cultural discourse amplifies trade flows. These findings validate the importance of narrative economics and the Culture-Based Development perspective.