Cultural proximity and trade

Cultural proximity is an important determinant of bilateral trade volumes. However, empirical quantification and testing are difficult due to the elusiveness of the concept and lack of observability. This paper draws on bilateral score data from the Eurovision Song Contest, a very popular pan-European television show, to construct a measure of cultural proximity which varies over time and within country pairs, and that correlates strongly with conventional indicators. Within the framework of a theory-grounded gravity model, we show that our measure positively affects trade volumes even if controlling for standard measures of cultural proximity and bilateral fixed effects. (C) 2009 Elsevier B.V. All rights reserved.