Linguistic Bridge: The Impact of New Official Languages on International Trade

ABSTRACT

We estimate the effect of official language adoption on bilateral exports using a difference‐in‐differences design that exploits 49 policy changes across 31 countries (1996–2019). With exporter‐year, importer‐year and country‐pair fixed effects, PPML estimates imply that sharing a newly adopted official language increases exports by 20.6%. Event studies show no pre‐trends, and placebo tests suggest the effect is unlikely to reflect spurious correlation. The effect is concentrated in communication‐intensive sectors (those with high O*NET communication scores, high contract intensity and differentiated products), consistent with reduced information frictions rather than political alignment. A general‐equilibrium counterfactual maps the estimate to a 2.91% reduction in ad valorem trade costs.